Friday June 12, 2015
Friday June 12, 2015
Our financial services industry in Britain has, in recent years, been seen as part of the problem – now it must become part of the solution.
That was the message from George Osborn MP, Chancellor of the Exchequer, in his 2015 Mansion House speech.
What is the Mansion House Speech?
Mansion House is the official residence of the Lord Mayor of London. It is used for some of the City of London's official functions, including an annual dinner, hosted by the Lord Mayor, at which the Chancellor of the Exchequer customarily gives a speech – his "Mansion House Speech" – about the state of the British economy.
It’s taken to be quite a big thing, and an indicator of what might be happening in the future in the UK.
There’s quite a few interesting Compliance-related bits in there (well, particularly from a UK perspective I guess).
I’ll leave what George Osborne said in speech marks (edited a bit by me), and add a bit of my own commentary too (not sat in a Mansion, unfortunately!)
Looking to the future
"I want us to be able to say this of your industry five years from now…UK financial services will be the best regulated in the world, with markets of unquestioned integrity and the highest standards of conduct."
"In five years’ time the City of London will remain the world’s leading international financial market, holding our existing pole position in trading foreign exchange and derivatives."
"But we will have further established ourselves as the pre-eminent Western location for new Asian markets like RMB, Rupees and Islamic finance."
"And let me be clear. I want Britain to be the best place for European and global bank HQs."
So it seems like there are big plans for not only the consolidation of the UK financial services market, but the expansion.
There seems to be references to scandals such as LIBOR and an implication that UK financial services may not have been the best regulated in the world. It’s interesting to me to see that there is also a recognition of the expansion of less ‘traditional’ areas, as the East comes west. I think we’ll see a lot more of this, particularly of the Renminbi and Shariah finance.
The final comment might be a thinly veiled reference to HSBC and Standard Chartered, and echoes the conciliatory notes of the quote I have used at the start of this blog. It seems the penny is dropping that big firms are flexing their muscles about moving East.
Focus on Individual Responsibility
"But I am also clear that it is in our national interests that that is achieved alongside a regulatory system that protects all those who rely on banks."
"Boards and top management must live up to their responsibilities – and face the consequences if they don’t."
"But simply ratcheting up ever-larger fines that just penalise shareholders, erode capital reserves and diminish the lending potential of the economy is not, in the end, a long term answer."
"It also leaves those guilty of misconduct untouched."
"The public rightly asks why it is that after so many scandals, and such cost to the country, so few individuals have faced punishment in the courts. In any other walk of life those who committed these offences would be in prison."
"The Governor and I agree: individuals who fraudulently manipulate markets and commit financial crime should be treated like the criminals they are – and they will be."
In the UK we are moving toward increased personal liability and responsibility, particularly under the new Senior Managers regime. It’s interesting that fines are apparently not the answer. There will probably be more focus on ‘punishing’ individuals, but if I were betting on it, I’d guess that the fines will continue too…
We also see the impact that the media and public have on this. Is this really what the Government thinks, or is this a reflection of what the public want (which is, after all, the function of the government isn’t it?) This is something we consider in our GRC Diploma – who actually influences regulation?
Anyway, the rhetoric from Mr Osborne seems quite bold, so let’s see how we get on shall we? Is it just a speech or will things change? I suspect a bit of both, but I certainly expect regulatory compliance to stay high on the agenda.
If you want to see the full speech, you can find the text here.
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