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In Focus Consumer Credit


Banking standards: turning ideas into reality


Leveraging the power of collaboration to bridge the gap between ‘what is required’ and ‘what is expected’ when conducting financial services


Richard Hill Executive director, the Centre for Compliance and Trust at Cambridge Judge Business School r.hill@jbs.cam.ac.uk


In June 2015 the Bank of England, the Financial Conduct Authority (FCA) and HM Treasury published The Fair and Effective Markets Review Final Report (FEMR) which called for firms to: “Take greater collective responsibility for developing and adhering to clear, widely understood and practical standards of market practice, in regular dialogue with the authorities.”


Setting standards While this report focused on fixed income, commodities and currencies markets (FICC), there is a compelling argument for a similar approach across other financial markets and services where there exist so-called ‘grey areas’. In other words, areas where it is not immediately obvious what course of action is compliant not just with law and regulation, but also with society’s expectations. By fostering high conduct standards in


grey areas, firms can proactively rebuild public trust. By ensuring conduct standards keep


pace with market innovation and changing perceptions of what is acceptable behaviour in a business environment, the industry can quell the risk of over-regulation and associated legal risk: the FEMR Final Report makes it clear that, if market participants fail to take the opportunity for collaboration, “more restrictive regulation is inevitable”.


February 2016


Roger McCormick Managing director, CCP Research Foundation roger.mccormick@ ccpresearchfoundation.com


Chris Stears Research director, CCP Research Foundation chris.stears@ ccpresearchfoundation.com


The criticisms banks continue to face


across a wide range of activity, whether or not resulting in regulatory action, all suggest that we need to develop a new consensus on ‘what is expected’ that goes some way beyond mere compliance with the law.


Approaching standards The FEMR’s call for standards to assist in understanding ‘grey area’ uncertainty echoed points made over a year earlier in the May 2014 report of the Banking Standards Review Council (the forerunner of the Banking Standards Board). That report pointed towards a variety of principles which should underlie standard setting, key among them:


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