In September 2011 I wrote a post offering support to Ed Milliband’s idea of imposing a code of conduct on bankers, to be backed up with the threat of ‘striking off’ those that contravene the code. In a comment on that post I was challenged to justify this support, given the disanalogies between ‘bankers’, and doctors or lawyers. Having re-read my reply I thought some of the ideas there merited their own post, so here it is!
It is certainly true that the activity of banking is quite different from that of medicine or even law, in part this is because it is an activity undertaken by organisations rather than individuals; in part because the acceptance and management of risk (as opposed to its elimination) is a central part of banking activity.
Thus the aims of the GMC, which are focused on maximising protection of patients through monitoring of individual doctors look very different to the statutory objectives of the FSA, which are much more focused on the performance of the system as a whole and the maintenance of ‘appropriate’ protections.
So, the activity of banking is going to be a more complex combination of individual activities, coordination of those activities and, related to this, the structural features of the sector (the institutions that exist there and how they work and interact). All these elements are significant and perhaps the break up of the FSA into the Financial Conduct Authority and Prudential Regulation Authority is in part recognition of this.
Aside from the challenge of separating issues of individual conduct from, say, coordination challenges (if such a separation can be made – it may be clear that some individuals, such as managers in banking organisations, have specific responsibility for coordination), there are other issues with regulating individual conduct – in particular, determining which groups of individuals should be regulated and the standards to which they should be held. While this may be overcome in some instances by imposing judgments on organisations as a whole, I don’t think there is any reason for thinking that we *cannot* impose appropriate standards on individuals across the banking sector. It will just be complex.
But then this is what the regulator and the professional bodies are for (I don’t think it matters too much how you divide the work between them). Indeed, it seems that some of these ideas are coming out in the initial communications by the FCA, with a greater focus on ensuring fairness, developing a culture of responsibility, and more scrutiny of the judgments of senior management.
Of course it’s true that the initial position that Milliband took of ‘striking off’ bad bankers is too simplistic, and all these complexities need to taken into account. But the basic idea still strikes me as a plausible one, and drawing the links between banking and the more traditional professions is still a useful exercise.