November 11, 2015 / 2:59 PM / 4 years ago

UK financial industry watchdog tells top managers to get more involved in compliance

LONDON (Reuters) - Mark Steward, the new head of enforcement at Britain’s Financial Conduct Authority (FCA), suggested on Wednesday that senior management at Britain’s financial services firms should take more direct responsibility for regulatory failings.

The logo of the new Financial Conduct Authority (FCA) is seen at the agency's headquarters in the Canary Wharf business district of London April 1, 2013. REUTERS/Chris Helgren

The industry has been dogged by scandals ranging from mis-selling to market rigging since the financial crisis and regulators worldwide are imposing multi-billion dollar fines and a raft of draconian new rules in an effort to instill a culture that puts customers before profit.

In his maiden speech, made at the MetricStream GRC (governance, risk and compliance) Summit in London, Steward said Murphy’s law - the adage that if things can go wrong they will go wrong - proved to be alive and well in business.

But Steward said only twice in his long career had the chief executive of a company that had fallen foul of regulatory rules personally attended every meeting with lowly regulators to demonstrate how seriously he took a remediation programme in “an enormously powerful message” to both the company’s staff and to the regulator.

Steward, an Australian former lawyer who joined the FCA last month after more than a quarter of a century in similar roles in Hong Kong and Australia, said this did not mean there was a “get-out-of-jail-free card”. But he noted it was relevant when regulators decide on what penalties to impose.

Even good systems and controls could be exploited by rogue traders, he said. But the financial industry should ask itself how quickly problems are escalated to the right people, how many problems are speedily resolved - and how easy they are to fix.

“Many know their problems but can’t fix them,” he said.

“That is a sign that culture isn’t working ... problems that don’t get resolved get bigger or become toxic ...

“I think that the need for early detection and effective uprooting of misconduct - or the effective solving of a problem - is the most important thing any organisation can do.”

He also said the FCA would continue to target both individuals and companies and keep a close eye on how financial services are provided to retail and wholesale customers, on whether capital markets are operating smoothly, on anti-money laundering and ensure regulatory standards are met.

Brushing aside a suggestion from the floor that too heavy-handed regulation in one financial centre might prompt firms to seek a lighter touch elsewhere, Steward noted that regulators in major financial centres such as Hong Kong, London, New York and Singapore cooperated and collaborated - and he didn’t see much room for such so-called regulatory arbitrage.

But he said it was important for regulators and the industry to also cooperate. “We are on the same table at all times,” he said.

Steward was speaking as British finance minister George Osborne and Bank of England Governor Mark Carney told a separate London conference on culture in the financial industry that they had no plans to “hug a banker” or relax stringent regulations on an industry lambasted after the 2008 taxpayer-funded bailouts.

Reporting by Kirstin Ridley; Editing by Greg Mahlich

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below