Rowan Bosworth-Davies | ‘Hector Sants is exactly what’s wrong with the City and its style of regulation’
March 20th, 2012
In this guest post, financial crime consultant and former Scotland Yard detective Rowan Bosworth-Davies, puts his finger on the fundamental flaws in the way in which the financial sector is regulated in the UK. He believes the major issue is a cultural one. If fellow bankers are in charge of the regulator they come to the job with a mindset that predisposes them turn a blind eye to, or cover up, some very serious offences.
Many years ago, as part of my M.A. degree in financial criminology at the University of Exeter, I did a thesis on how compliance officers in the financial sector regard the offence of insider dealing. The vast majority didn’t see it as a bad thing and admitted they would do it themselves if they thought they could get away with it. The lesson I took from the exercise was that if you entrust City professionals to ‘police’ themselves and the broader financial sector, they’ll bring a certain amount of baggage to the role.
Finance industry insiders just don’t ‘see’ or ‘look’ for the indicators that a professional law enforcer sees or looks for.
Thus it has been with FSA chief executive Hector Sants, who resigned last Thursday night. Sants is a professional banker and has the mindset of such a person. He didn’t see or appreciate what was going wrong inside the banking sector in the build up to the crash, because culturally he was predisposed to ‘not seeing’. You might argue that he was ‘wilfully blind’. I suspect that it wasn’t necessarily wilful. It may just have been ignorant.
Sants is exactly what’s wrong with the City of London and its style of regulation. The British have always believed that the ‘great and the good’, operating on the cult of the enthusiastic amateur, can police wrong-doing in the City, and this it is perfectly acceptable to have ‘revolving door’ between the regulator and the regulated. But they can’t, and it isn’t. What’s needed is regulators who are familiar with the ways of criminals. After all, banks today fit every known definition of organised criminal enterprises.
The FSA is staffed by a lot of people with fancy job titles who like to meet and greet with other regulators around the globe, but none of whom have ever investigated a shop-lifter. How can they be expected to bring any real sense of criminogenic insights to their role when they themselves come out of the same class and background as those they purport to supervise?
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