The chairman bemoans a cultural shift towards the concept of in-house regulation and postpones discussion about his French protégé’s conviction for the loss of £4 billion of Scam’s money.
”Were you aware Northampton’s financial services companies are to be empowered by the Cloud?” I asked the chairman of the implausibly-sized investment company Second Coming Asset Management as we met for a pint or two of Number Of Exciting Initiatives at The Joyous Light’s Return. “I was not,” the chairman admitted. “Should I be?”
“Frankly, I have no idea,” I shrugged. “I’ve read the press release three times and, aside from learning Northampton is apparently a financial services ’hub’, I’m not sure what the whole thing is about. Plus, since there’s no mention of ’the Cloud’ in the actual release, I can’t tell you what that is either.” “That’s a shame,” said the chairman.
“Being ’empowered by the Cloud’ sounds rather nice, if not an occurrence one would usually come across within Her Majesty’s financial services industry.” “Oh, I don’t know,” I said. “Two definitions of ’cloud’ are ’a dim or obscure area in something otherwise transparent’ and ’anything that obscures or darkens something, or causes gloom, trouble and so on’.
”Funny how it’s only during the bad times it turns out we’re all in this together”
“So, changing the subject completely, what did you think of FSA boss Hector Sants’ speech on whether organisational culture in the financial sector can be regulated?” “At my age, I try and stay away from things that make me sad,” the chairman replied. “It’s why I like the idea of the Cloud. Still – and do be gentle – what did young Sants have to say this time?”
“He thought regulators should recognise culture as a legitimate area of intervention and suggested they also had the means to judge it,” I said. “Quoting St Howard of Davies, he said it is not for ’the FSA to seek to act as the conscience of the Square Mile’ but regulators still have a central role to play. (article continues below)
“This, Sants continued, should be ’to ensure firms have the right culture for their business model – the right ethical framework – to facilitate the right decisions and judgments and we should intervene when we find those frameworks are lacking’. Now, would you like to know who the FSA sees as the frontline for achieving the appropriate culture across Her Majesty’s financial services industry?”
“I think I can guess,” sighed the chairman. “It’s me, isn’t it?” “If it’s any consolation, not just you,” I replied. “But Sants did stress: ’The ’tone from the top’ remains critical and if a regulator is concerned, its first action should be exhorting the CEO and the board to take remedial actions. I would hope in most cases boards would respond to such warnings.’
“But he added: ’If not, regulators may well have to resort to the stick of the authorisation process and, if necessary, push for those individuals to be changed or, where necessary, require them to be.
However, our interventions alone will not solve the problem. Trust is won or lost by one’s own actions, so the responsibility for addressing this issue rests with us all.’
“How very Cameronesque and of the moment,” the chairman noted. “Funny how it’s only during the bad times it turns out we’re all in this together.” “I think even the wonderful world of investment would have to admit there’s nothing like going through a bit of a rough patch and the spectre of oblivion to focus the mind,” I observed.
“On which note, I was interested to see Sants also said: ’Over the past two years, the FSA has radically overhauled both its supervisory philosophy and its capability to deliver it.’ That slightly makes you wonder how fit-for-purpose the regulator was during the first 80% of its existence and confirms our own theory that it took the threat of being canned to encourage it to get its own house in order.
“Anyway, while we’re on the subject of a firm’s internal culture, shall we move onto just how your young French exchange placement Jérome Gerbil was able to trade more than £40 billion of Scam’s money, resulting in a £4 billion plus loss, all on his own account and unbeknownst to you and your board and thus thoroughly deserves being jailed and ordered to repay the loss plus interest accruing daily at some £75,000? Or shall we save that for another time?”