Conduct of Persons in Financial Services: Causing a Financial Institution to Fail

25 04 2014

imagesThe Financial Services (Banking Reform) Act 2013 (the Act) is yet another Leviathan statute. The Act is spread out over eight parts encompassing one hundred and forty-eight sections and contains ten schedules. First of all, this wide-ranging legislation implements the recommendations of the Independent Commission on Banking (or ICB, chaired by Sir John Vickers). Equally, it also implements the recommendations of the Parliamentary Commission on Banking Standards (or PCBS, in relation to the LIBOR scandal) which aim to improve culture and standards in the banking sector. Moreover, under section 17, the Act also provides the Bank of England with the new stabilisation “bail-in option” under the Banking Act 2009.

Independent Commission on Banking

In its final report, the ICB remarked that:

Banks are at the heart of the financial system and hence of the market economy. The opportunity must be seized to establish a much more secure foundation for the UK banking system of the future.

Recommending structural reform of the banking industry, coupled with measures designed to increase the capacity of banks to absorb losses, the ICB’s work focused on cost effective solutions as regards rescuing failing banks. Read the rest of this entry »

London School of Economics: Lunchtime Workshop on Benchmarking and Metrics for Bank Ethics and Behaviour

24 04 2014

The Conduct Costs Project of the London School of Economics (LSE) is hosting its first Lunchtime Workshop on Benchmarking and Metrics for Bank Ethics and Behaviour on Wednesday 14th May 2014. Confirmed Speakers include Tom Sleigh (Banking Standards Review), James Palmer (Herbert Smith Freehills LLP) and Tania Duarte (LSE Conduct Costs Project). Professor Roger McCormick – Director of the LSE’s Conduct Costs Project – will chair the event. Attendance at the Lunchtime Workshop is free of charge, but attendees must please book a place by sending an email to no later than 2nd May. The event shall take place at the LSE, New Academic Building, The Wolfson Theatre. Attendance is free. However, if you are interested in helping to fund the Project’s activities please get in touch with the Project Director Professor Roger McCormick at or by telephone on 07802 604 316.

Tom Sleigh, Banking Standard Review

Tom works for Lloyds Banking Group (LBG), where he spent two years as Chief of Staff to the Managing Director for retail and wealth customer products. On joining he oversaw the expansion of the team to include Intermediary distribution, Halifax Share Dealing, Scottish Widows Bank and the Customer Insights research team, to become 3,000 staff strong across multiple UK sites.

Prior to this Tom was Chief Advisor to the COO at the BBC, and began his career at strategic consultancy Booz Allen Hamilton.

LBG seconded Tom to the Banking Standards Review, working for Sir Richard Lambert, with the goal of establishing a new body to raise standards of competency and conduct in UK banking. Read the rest of this entry »

ICE LIBOR and the Slippery Road Ahead

12 04 2014

The head of the Financial Conduct Authority (FCA) is somewhat of a superstar in the world of finance and regulation. Unsurprisingly, Martin Wheatley makes a lot of speeches. He famously authored the Wheatley Review (the review) – the blueprint as regards reforming the world’s “most important number”, i.e. the London Interbank Offered Rate (LIBOR). Aiming to impress the government and the public, Wheatley’s rhetoric revolves around buzzwords such as accountability, conduct and governance.

Only late last year, speaking on modelling integrity through culture, he reiterated that:

Our own emphasis on conduct and culture is heralded by our work to strengthen benchmarks. We’ve been at the vanguard of establishing a regime that is practical, but that nonetheless results in a shift in firm behaviour and individual accountability. As I prepared to take on the task of chief executive of the FCA, I was also asked to review whether the revelations surrounding LIBOR required a wider policy response. The policy recommendations resulting from this review – now known as the Wheatley Review – have delivered a LIBOR regime that provides for accountability, strengthened governance and robust systems and controls around the submission of rates.

Read the rest of this entry »

Flaux J Vindicated: Court of Appeal on Amendment, Implied Representations and the Efficiency of LIBOR

20 01 2014

Graiseley Properties Ltd & Ors v Barclays Bank Plc & Ors [2013] EWCA Civ 1372

The appeals from the High Court in Graiseley Properties Ltd & Ors v Barclays Bank Plc [2012] EWHC 3093 (Comm) (Flaux J, see post here) and Deutsche Bank AG & Ors v Unitech Global Ltd & Ors [2013] EWHC 471 (Comm) (Cooke J, see post here) were decided by the Court of Appeal (Longmore & Underhill LJJ, Sir Bernard Rix) in Graiseley Properties Ltd & Ors v Barclays Bank Plc & Ors [2013] EWCA Civ 1372. In a robust but concise judgment, the Court unanimously allowed the appeal from Cooke J and dismissed the appeal from Flaux J.

The critical question before the Court of Appeal was, in relation to the two cases mentioned above in which banks were seeking to recover sums due under loan or swap agreements, whether the borrowers should be allowed to amend their pleadings in order to allege that the banks had made implied representations in respect of the efficiency of or the non-manipulation of the London Interbank Offered Rate (LIBOR). Read the rest of this entry »

Roger McCormick: Book Review: Market-Based Banking and the International Financial Crisis, edited by Iain Hardie and David Howarth

19 01 2014

1df0f60Economics and political economy lack the analytical tools to explain the differing impact of the recent international financial crisis that erupted in 2007 on developed economies. The principal aim of this edited volume is to offer a ‘market-based banking’ framework which transcends the dominant dichotomous understanding of financial systems in terms of credit-based and capital-based. Market-Based Banking & the International Financial Crisis, Iain Hardie and David Howarth (eds.), Oxford University Press, August 2013, attempts to provide a framework that is more reflective of banking in modern financial systems; one that provides a more successful explanation of the differential impact of the recent financial crisis. Reviewed by Roger McCormick.

This book is based on a collection of papers written by political economists and derived from three workshops held in the period 2009-2012 in Edinburgh and Victoria, British Columbia. (The Editors both have connections with the University of Edinburgh). The financial systems of, and the experience of the Crisis in, eleven different countries are considered: UK, USA, Canada, Belgium, France, Germany, Italy, Spain, Greece, Holland and Japan. Read the rest of this entry »

Conduct Costs Project Launch Event

13 12 2013

On 10 December 2013, the Conduct Costs Project publicly launched the project’s results at an open event at the London School of Economics. This was an opportunity for stakeholders from various backgrounds to hear the results from the project team face to face, following the publication of the project’s results on the project blog on 28 November 2013.

The presentations were chaired by the project’s director, Roger McCormick who introduced the audience to the members of the project team and the project’s context, history and scope. Roger highlighted the importance of accessible, consumer – friendly information, and the relevance of “restoring trust” in financial institutions.

It was vital, he stressed, that data was presented in a way that enabled the public to compare one bank with another, the media’s role in generating public awareness and debate being of crucial importance. He also encouraged banks and regulators to be more forthcoming with the public about why heavy conduct costs were still being incurred and what was being done to ensure that they start to go down. Read the rest of this entry »

LSE’s Conduct Costs Project

1 11 2013

The London School of Economics has been concerned about conduct costs – which are an important phenomenon in the financial markets – for some time and the numbers are getting bigger and bigger. In the above video, Professor Roger McCormick, who is the Director of the Sustainable Finance Project, shares the Conduct Costs Project’s vision with the world.

The aggregate five-year figure for the ten banks in the project’s sample is a whopping £150 billion. Compare that to the annual budget for the National Health Service which is just over £100 billion (but please do note that the NHS is the world’s fourth largest employer). So since everyone – the banks, the regulators and the public – has a stake in the future of (sustainable) banking in the post-LIBOR scandal era, Roger would like to encourage people to post constructive articles on the LSE’s Conduct Costs Project Blog.

More information about the project is set out below. Read the rest of this entry »


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