It has emerged that two board members at HSBC's UK business are preparing to quit in protest over new conduct rules - further evidence of the growing pushback against the legislation, which could see reckless bankers jailed for their role in financial wrongdoing.
The news follows
the joint publication by the Prudential Regulation Authority and the Financial Conduct Authority earlier this year of two consultation papers aimed at improving individual responsibility and accountability in the banking sector.
"Serving on a bank board will be a much less attractive proposition"One sets out a
new regulatory framework that makes substantial changes to the individual responsibility of senior managers of banks and building societies, while the other introduces
new remuneration rules that include giving firms more power to exercise clawback rights over bonuses.
Getting away with it
It is right that senior bank executives should be more responsible for their actions, according to Mark Carney, the Governor of the Bank of England. He called on any executives unhappy with the new rules to resign, reports
The Telegraph.
He said: "If you're chair of an audit committee, you have responsibility for the activities of an institution. And if you don't think you can discharge that responsibility, you shouldn't be on that board."
One of the legacies of the economic crisis in the US and, by and large, in the UK was that the individuals involved in financial wrongdoing escaped punishment, added Carney. "They got away with their compensation packages, they got away without sanction," he said. "Maybe they were not at the best tables in society after that, but they're still at the best golf courses. That has to change."
The Telegraph article
Ethical transformation
Complying with the new conduct rules is not enough. Financial leaders need to undergo an ethical transformation to ensure the financial system is no longer a threat to prosperity and trust in free markets. That is the view of bankers who attended a recent International Monetary Fund panel discussion, reports
The Wall Street Journal.
"We do need a form of personal transformation of the leaders and the leadership in this industry," said Philipp Hildebrand, Vice Chairman of global investment management company BlackRock and a former head of the Swiss National Bank. "You really need a change; you need a focus on stewardship rather than simply maximising personal wealth and the wealth of those who work closely with you."
Kok-Song Ng, Chair of Global Investments at the Government of Singapore Investment Corporation, added: "The history of ethics should be around what you do as a virtuous person, not just looking at consequences, not just looking at rules. It takes you well beyond the personal."
The Wall Street Journal piece
Talent drain?"Wanted: senior managers with banking experience who aren't afraid of prison and don't mind having their bonuses snatched back seven years after they're paid," is the message from
Bloomberg Businessweek. It reckons lenders may find it increasingly difficult to recruit senior executives amid regulators' attempts to focus accountability on individuals.
"Serving on a bank board going forward will be a much less attractive proposition, even if it's better remunerated," warned Stuart Willey, a London-based partner at law firm White & Case.
But it will prove difficult to prosecute individuals, warns Celyn Armstrong, a lawyer at Linklaters in London. "It will be difficult to prosecute in practice, as it's hard to prove what the directors knew at the time."
Bloomberg Businessweek story
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