Individuals too are facing
Kweku Adoboli, the former
UBS trader who racked up
losses of $2.3 billion has not
only been jailed for seven years
but is currently fighting extradition, despite having lived in the
UK for 24 years. Tom Hayes, an
ex-UBS trader found guilty of
fiddling Libor has also been sentenced to 14 years in jail.
Now, while there is a divide
between criminal and civil law
and between prudential and
conduct regulation, there are
already very real consequences
for those who break the rules.
Would having an “
independent” enforcement body with
another big stick make any difference? I don’t believe it would.
Nor does the FCA.
In a statement, the regulator
said: ““Much has already changed
since the period considered in
the HBOS report with the FCA
learning valuable lessons from its
predecessor including changing a
number of its processes.
“As we have previously stated
the ultimate responsibility for the
failure of HBOS rests with the
Board and senior management.
They failed to set an appropriate
strategy for the firm’s business
and failed to challenge a flawed
business model which placed
inappropriate reliance on contin-
uous growth without due regard
to risks involved. In addition,
flaws in the FSA’s supervisory
approach meant it did not appre-
ciate the full extent of the risks
HBOS was running and was not
in a position to intervene before
it was too late.
“The FCA and the Prudential
Regulation Authority (PRA)
decided to start investigations
into certain former HBOS senior
managers and those investigations
are continuing.” The FCA said it
now intends to further consider
the TSC’s recommendations.
Then there is the issue of fines.
While the big fines levied on
financial services companies
make for impressive headlines,
the money still comes from one
place – customers’ pockets.
Think of it this way. If you have
no regulation at all and firms do
what they like, the customer will
get screwed over at the point of
sale. When you have strong regulation and the regulator fines a
company for breaching the rules,
companies will increase prices to
their customers to ensure they can
offset any financial losses. So, the
latter is perhaps marginally better
than the former, but neither are
So do we need to look at
another way of funding an inde-
pendent enforcement body? And
would the British public have an
appetite for that? Unlikely.
Also, what is the ultimate
aim of having an independent
enforcement body anyway? To
have every business playing by
the rules and “in the spirit” of
regulations? The very nature of
innovation doesn’t work like
that. Businesses build their products and services by developing
a competitive edge which utilises
loopholes and keeps to the minimum standards required.
So, even if an independent
enforcement body were to be
established, a state regulator can
never keep tabs on every individual bad practice.
The City’s largest financial
institutions have deep pockets
– far deeper than any regulator –
and that means they can afford to
employ the best talent. No matter
how menacing an independent
enforcement body would be,
there will always be well-paid,
looking for ways to circumnavi-
gate regulation. There is a whole
consultancy industry based on it
and that isn’t about to change.
So, while the Treasury Select
Committee’s suggestions are
extremely well meaning, I
doubt many in the City are
trembling just yet. n
n THE TRADE n ISSUE 49 n AU TUMN 2016 n www.thetradenews.com 27
n “There will always be well-paid, highly- informed, individuals looking for ways to