General articles

Ending the age of irresponsibility

Reputation in Capital Markets

Reputational damage

Such is the extent of the reputational damage on the Capital Markets, financial authorities are adopting a zero tolerance stance to market abuse and non-compliance. Mark Carney, Governor of the Bank of England declared:

“… for others, who free ride on your reputations: the Age of Irresponsibility is over.”

A call to action was made to address the deficiencies in the markets, to check unethical practice and reduce ethical drift. And it is here where b-next has an important role to play, as it proceeds with a new stage of its journey.

Recent market abuse

Recent high profile criminal cases against traders who have abused their positions of trust in the financial markets, are a huge wake up call for traders and senior managers. Scandals such as Libor rate rigging have not only resulted in nine figure fines for large banks, but have damaged investor confidence, prompting a call for improved strategic risk management and surveillance capabilities.

Doing the right thing

Now, more than ever, there is an urgent strategic need not only to comply with regulations, but also to adopt a culture where firms and individuals “Do the right thing” instinctively when it comes to compliance, regulation and reputation. Such a goal cannot be accomplished without support and this is where automated surveillance solutions can be of help. These solutions will be of particular use in previously unregulated areas such as foreign exchange.

A transformation in risk management and compliance

As financial institutions have been obliged to comply with ever increasing regulatory requirements, a transformation has occurred. The performance and solvency of a bank may depend substantially on the efficiency and effectiveness of its internal monitoring processes for risk management and compliance. Consequently, serious attention is now being given to the surveillance and prevention of market abuse.

The benefits of automation

Such is the complexity, magnitude and dynamic nature of the surveillance task that automation is emerging as a viable and practical solution. The benefits of implementing automated solutions are wide reaching and can include:

  • The ability to respond quickly to regulatory changes and reporting requirements
  • A reduction in workload and associated costs
  • Proactive management of suspicious trends
  • Improvements to the quality of market abuse monitoring
  • Improvements to risk management and compliance oversight

Market abuse – a moving target

Software solutions are available currently that can help institutions to protect themselves and their investors against fraudulent activity. However, solutions providers and institutions cannot stand still when protecting their reputation against the manifold scenarios of potential fraud mentioned above. Moreover, with ever increasing regulation and unknown future fraudulent scenarios yet to come, a reactive approach to the issue of market abuse is becoming increasingly untenable. Instead, a more strategic, systematic and urgent approach to benchmark analysis of potentially fraudulent activity must now be an urgent priority. Action to implement the necessary systems alone won’t be enough to effect real change. To make this work, firms and individuals must embrace a culture that strives to do the right thing by exceeding the minimum regulatory requirements across all areas of their business. Only then will we be able to say that we have truly ended the age of irresponsibility in financial markets.