2 events, 2 reports, 2 Baileys, 1 concern

I doubt I will attend two events in one day with Andrew Bailey again, and with deference to him that is probably for the best.

Navigating London when the events overlap, & staying ahead of the Governor’s Limo, required a quick exit and taxi.

And no, I didn’t try and cadge a lift.

𝗙𝗠𝗦𝗕

The 1st event was held in Bloomberg’s cool London HQ. You arrive into “the vortex”, a lobby of swirling wood from where you are whisked up to the heavens.

You pass an artwork called “no future is possible without a past”. Which could be a title for the FMSB report issued yesterday, on the Future of Financial Markets

https://lnkd.in/eAEG8DJb

Both the report and event marked 10 years from the Fair & Effective Markets Review, published in the wake of serious misconduct.

It was a good event, and the FMSB continues to fill the space beyond regulation into the areas where dilemmas, conduct risk & motivated reasoning lurk.

I don’t have space to summarize all, suffice to say there is much that needs attention, with changes in liquidity, tech, infrastructure, AI, crypto, cyber, resilience etc.

One speaker talked about the shift from human risks to machine driven; and on this point I would push back on any misplaced confidence that the former has been addressed in any meaningful way.

We need to be careful not to be dazzled by the baubles of AI and crypto, like artwork in a Bloomberg lobby, to the detriment of (understanding) the behavioural root causes that remain.

𝗦𝘂𝗽𝗲𝗿𝘃𝗶𝘀𝗼𝗿𝘀 𝗼𝗻 𝗦𝘂𝗽𝗲𝗿𝘃𝗶𝘀𝗶𝗼𝗻

A dash to the LSE for an event hosted by the Systemic Risk Centre & Starling Trust. It coincided with the publication of a report and stocktake exploring how supervisors tackle culture risk.

https://lnkd.in/eJZqaAbc

As has been repeatedly proven behavioural risks threaten banks, regulators and the wider system.

The intro notes the need to move organizational culture from being considered ‘problematic’ to a ‘problem’ that needs to be defined, examined, and wrestled with. I would extend that to being not just a “problem”, but an “imperative”. Key to performance, resilience, conduct and compliance.

There is more to come, and I applaud the focus of Starling and those outliers in banks and regulators forging a path of better practice.

However, despite the GFC, conduct crises and events of 2023 the level of behavioural expertise in regulators, banks and other FS firms is thin.

A bank or regulator that had no core capability to understand and address cyber risks or AI would be pilloried or sanctioned. But those with a lack of capability and curiosity on the pervasive risks of culture are met with a resigned shrug.

There’s a blind spot about a blind spot. A core risk to banks, regulators, the financial system and to us all.