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Empower the Grey Panthers

Comment 5th July 2010

City folklore suggests banking regulators are motivated to a) avoid blame fore recent issues b) stay alive c) avoid regulatory arbitrage. There is a collosal amount of legacy and new regulation in the pipeline. Penalties are not evenly apportioned. Key regulators appear overworked and uncertain.

Within the Tier 1 investment banks, Compliance teams and Business heads are not working together well enough to meet the public's demands for a more responsible City. A victim culture still exists whereby responsibility for compliance is not being owned by the right people. Penalites are views as ill-informed, arbitrary and consequently an ostritch-style gambler approach emerges. Do nothing and wait for our competitor to get it in the neck, then we'll put a plaster on.

Rather than wait for major (ill-directed, fear-based?) penalties and perhaps more systemic rupture to force a short-termist City to change attitude, I would argue changed/new legislation to expand the role of the FSA's "grey panthers". They have significant and deeply respect reputation over many years for integrity and discretion. Rather than being deployed to find regulatory failures, I believe a more pragmatic and successful line would include coaching and mentoring Head of Product Line Operations to take responsibility for regulatory risk (within their firms and collaborating through the trade body).

If Product lines and COOs do not step up the plate, given this support, then the FSA has every reason to fine heavily, and fine individuals too by barring them from working in the financial serivces. That will work better than a £33.3m fine against JPM, where client money issues were missed by the auditor, the regulator and the bank itself for years.

By working diirectly with decision makers across the City, being employed by the FSA, and liasing with Commissioner Barnier, SEC, etc, the Grey Panther could save a lot of risk, cost and time all round.

This apporach shoudl support a robust, hard-fighting and well-regulated City.

Why does this matter?

The risk of systemic failure in the City is real, still. Current apporaches are not working as those firms the regulator needs change from the most are not being engaged appropriately. These firms are not engaging the regulator.

Necessary communication is not occuring and hence the cost to system of reputational/other failure is significant..

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