style="font-size:15px;"> ● Unsustainable credit boom and asset price inflation (with inadequate capital requirements)
● Increasing complexity and opacity of the securitised credit model
● Misplaced reliance on sophisticated mathematics
● Transmission of loss of confidence and bank funding liquidity into real economy effects
● Hardwired procyclicality creating self-reinforcing feedback loops
● Impaired ability to extend credit to the real economy exacerbating the economic downturn
Economist Robert Shiller added:
The central bankers didn't see it as their mission to think about mortgages that are being written or to worry about the shadow-banking sector, because they weren't banks so they weren't under supervision, so they let things go. Those are mistakes, but understandable given the bureaucratic structure.5
Compliance failing included:
● Insufficient due diligence seems to have been carried out on complex products traded.
● Insufficient attention was paid by compliance on the capital or funding positions of banks.
● Insufficient warnings were given about lending practices such as high multiples of income, low deposit requirements, buy-to-let mortgages, self-certified mortgages, and mortgages over 100 percent of asset value.
● Modelling of stressed situations that could arise was insufficient.
● Aggressive advertising and rewards were obvious but unchecked.
● Some more conservative banks, such as Standard Chartered and HSBC, to an extent, stood aloof, but this did not encourage different patterns of behaviour amongst the compliance community.
These are the basics of compliance supervision. There may be instances where individual compliance officers had insight and spoke up, but they were either not listened to or did not have the stature or import to make a meaningful difference. Some, it is understood, were relieved of their duties for their efforts as the race for new business was on.
Regulators' relative inaction and lack of pressure made it difficult to find an intellectual justification for a more compliance intervention. Particularly inexplicable was the unwillingness of regulators and compliance to do anything very differently after the early warning collapse of Northern Rock in 2007. Unfortunately, the performance of regulators and of compliance are actually and metaphorically bound together.
Legacy of Failure
Given compliance's recent record, it would be reasonable for boards, governments, and consumers to ask whether compliance is actually worth the money. Why should companies, the industry collectively, or its many stakeholders have confidence in the compliance function?
Yet, despite this record, firms and financial systems across the world continue to plough increased resources into the compliance sector. Compliance is one of the fastest growing functions in the industry. Progressively fewer businesses view regulation as a burden, and while in 2007, prior to the crash, 76 percent of UK businesses surveyed predicted that the “burden from regulation would increase” in the next year, this figure fell to 43 percent.6
Why is this, when a rational response would be to cut budgets, numbers, and status and try some other way? Why may businesses be more accepting of regulation following a crisis than in times of plenty? The answer lies in the question. There is no plan B, no other way available, apparently, for the moment. This lack of alternative has allowed an opportunity for compliance and regulators to reassert their credibility. The default setting continues to be more rules, more and heavier enforcement intervention, and more expectations placed on compliance functions. The industry and its stakeholders seem to have no other option but to continue to believe in the compliance infrastructure as the principal instrument for maintaining stability and improving outcomes. However, the legacy of failure includes:
Конец ознакомительного фрагмента.
Текст предоставлен ООО «ЛитРес».
Прочитайте эту книгу целиком, купив полную легальную версию на ЛитРес.
Безопасно оплатить книгу можно банковской картой Visa, MasterCard, Maestro, со счета мобильного телефона, с платежного терминала, в салоне МТС или Связной, через PayPal, WebMoney, Яндекс.Деньги, QIWI Кошелек, бонусными картами или другим удобным Вам способом.
