Much has been written in the aftermath of the 2008 financial crisis on how we can avoid the “Too Big To Fail” bank problem.
Resolutions have been made; greater cooperation between governments, regulators and market participants brokered; rainy day money pots established; corporate governance arrangements tightened; clearer “responsible persons” regimes commissioned; and “bubble” early warning sirens have been rewired and amplified.
Poor behaviour has also been admonished, although the potentially poorest practice has yet to adequately satisfy society’s need for incarceration. The fines of the guilty have even been redistributed to the deserving. Bonus incentives have been challenged and in a number of cases realigned. Inappropriate sales incentives have been withdrawn and customer apologies written. Yet, we still worry that it won’t be enough for at least a decade to be confident that no bank is too big to fail.
Surely, if our financial institutions are well capitalised, market liquidity is deep, the checks, balances and disaster plans are regularly tested we needn’t worry...but we do. Why is that?
Is it simply that society does not have sufficient confidence to say that those running our key financial and regulatory institutions are “Too Brilliant To Fail”?
Well, in 2014 we may take a step in the right direction. I would encourage you all to make a resolution of your own. Please contribute to the Banking Standards Review. Sir Richard Lambert has been asked to create an independent body that will promote high standards of competence and behaviour across the UK Banking Industry. As a result will the UK become a beacon of competence and probity?
Customers buy trusted quality brands. They need to be crafted in the furnace, shaped on the anvil and polished and perfected in the hands of professional craftsman. It is now time for the financial services industry to come out of the furnace. Please do your bit and pump the bellows like mad. The deadline for submissions is 17 January 2014.
The ACT has already contributed its thoughts. In our view, the Engineering Council is an obvious role model for an equivalent independent body for banking. Industrial finance needs to lead the way. I’m sure that Brunel would have been happy that ‘Made in Britain’ still has a nice ring to it. Now all we need to do is to get the levels of professional competence up and the fault tolerances down to acceptable levels otherwise poorly engineered product, crafted by the unskilled could give rise to a very expensive repair business and an overblown regulatory response if harm ensues.
Smile. We’ve never had 2014 before. Starting the New Year are you unsure whether you are a half-full or half-empty person? Think like Brunel - he would have said, “you’ve got twice as much glass as you need and let me build you a different solution for your thirst.”
All the best.
