New Accountability in Financial Services: Changing Individual Behaviour and Culture

Description

This book is a critical examination of recently introduced individual accountability regimes that apply to the financial services industry in the UK (SMCR) and Australia (BEAR and the forthcoming FAR), together with a forthcoming new individual accountability regime ( in particular, SEAR) in Ireland. It provides a framework for analysing whether these regimes will achieve behavioural change in the financial services industry. This book argues that, whilst sanctioning individuals to deter future misconduct is an important part of any successful regulatory strategy, the focus should be on ensuring that individuals in the financial services industry internalise the norms of behaviour expected under the new regimes. In this regard, the analysis in this book is informed by criminological theory, regulatory theory and behavioural science. The work also argues for a “trajectory towards professionalisation” of financial services, and banking in particular, as an important means of positively influencing industry-wide norms of behaviour, which have a key influence on firms’ and individuals’ behaviours. Foreword to New Accountability in Financial Services Acknowledgements Contents About the Authors 1 Changing Individual Behaviour and Culture: An Introduction and Overview 1 Overview of New Accountability 2 Contribution to Existing Research in This Area 3 The Structure of This Monograph 2 “Responsively” Regulating the Financial Services Sector: An Evolving Architecture 1 Introduction: Theory and Practice 2 An Evolving Regulatory Theory 2.1 Responsive Regulation 2.2 Risk-Based Regulation 2.3 Smart Regulation 2.4 Meta-Regulation 2.5 Governmentality 3 Implementation in Practice: From “Light Touch” to Intrusive Regulation Generating Cultural Change 3.1 The Historical Trajectory: Light-Touch, Principles-Based Regulation 3.2 A More Stringent and Intrusive Approach Emerges 3.3 Extending the Intrusive Regulatory Impulse: Individual Accountability Regimes (IARs) and Cultural Change 4 Conclusion: Atrophy or the Potential to Flex a New Muscle? 3 The Systemic Problem of Unethical Behaviours in Financial Services 1 Introduction 2 The Scale of Unethical Behaviours in the Financial Services Sector 2.1 UK 2.2 Australia 2.3 Ireland 3 Causal Factors 3.1 Individual Motivations for Unethical Conduct 3.2 Firms’ Culture: The Influence of the Shareholder Primacy Norm 3.3 Structural Issues: The Nature of the Financial Services Industry 4 Conclusion 4 Generating Cultures of Compliance: The Limits of the “Big Stick” 1 Introduction 2 Politicisation: Bankers as Thieves, Crooks, and Terrorists 3 Weaponising the Law 3.1 UK 3.2 Australia 3.3 Ireland 4 Acting Out, Tooling Up, but Sanctions Are No Silver Bullet 5 Early Attempts at Individual Accountability: The Fit and Proper Test 6 The Problems with Punishment 7 Conclusion 5 The New Individual Accountability Regimes (IARs) 1 Introduction 2 Overview of the New IARs 2.1 The Allocation of Accountability to Senior Individuals 2.2 The New Conduct Rules for Individuals 2.3 Sanctions on Individuals for Breaches of the Conduct Rules 2.4 Other IARs 3 Are the New IARs Likely to Succeed in Improving Behaviours in the Financial Services Industry? 3.1 The Significance of Allocating Accountability to Individuals for Specific Areas of a firm’s Business 3.2 The “Achilles Heel” of Meta-Regulation? The Extent of Reliance on Firms to Ensure Individuals Meet Fitness and Probity Standards 3.3 Individual Accountability and “Credible Deterrence” 3.4 Individual Accountability and Influencing Ethical Decision-Making 4 Conclusion 6 Professionalising Banking: A Trajectory Towards the Internalisation of Norms 1 Introduction 2 What Is a Profession? 2.1 Specialist Training to Make Skilled Judgements 2.2 Serving a Positive Social Purpose 2.3 Self-Policing 2.4 Codes of Ethics/Conduct 3 A “Trajectory Towards Professionalisation” 3.1 UK 3.2 Australia 3.3 Ireland 4 Propelling Banking Further Along the Trajectory to Professionalisation 4.1 Education and Training 4.2 A Common Purpose, a Higher Purpose 4.3 Codes of Ethics/Conduct 4.4 Self-Policing 5 Conclusion 7 New Accountability in Financial Services: Concluding Thoughts Index