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      The Centre for Compliance and Trust (CCT) at the University of Cambridge Judge Business School and the CCP Research Foundation CIC have announced that they have entered into a collaboration under which data and expertise will be shared and the two institutions will arrange joint seminars and other events in areas of common interest.

      Please see here the copy of the announcement.

       

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      We are pleased to announce that, with immediate effect, Calvin Benedict has been made an Associate Director of the Foundation. Calvin has, for some years, been one of our most valued and trusted researchers and we are delighted that his expertise and energy can now be deployed at this senior level. Calvin will now step down as a member of the Advisory Board.

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      It’s no secret that banking has had to clean up its act, and quickly. The culture of the industry has been severely criticised – yet with no baseline standards in place it has been tricky to define what “good behaviour” might actually look like. Now, a new initiative led by the Centre for Compliance and Trust at CJBS and the CCP Research Foundation could help bankers make more ethical decisions.

      The problem, at least in the public mind, was that the reckless behaviour that helped create the financial crisis was a product of a win-at-all-costs culture, within which bankers felt it was acceptable to use underhand methods, or legal or regulatory loopholes, to maximise profit. This was what the Governor of the Bank of England, Mark Carney, speaking in June 2015, called an "ethical drift" in the sector, which meant that unethical behaviour "went unchecked, proliferated and eventually became the norm”.

      Carney was making a speech at Mansion House to mark the publication of the Fair and Effective Markets Review (FEMR) of fixed income markets. That report called for the establishment of common standards of market practice, and identified what it called “grey areas” between direct regulation or legislation and a company’s own promises to act in a more ethical way, as communicated via high level public commitments from senior management.

      And in a move to address these grey areas, the Centre for Compliance and Trust and the CCP Research Foundation have jointly launched an initiative to help companies avoid further scandals, reputational damage and more restrictive regulation, which Carney warned would be “inevitable” if firms and their staff fail to take the opportunity common standards would present.

      The initiative, which will run throughout 2016 and 2017, will be based on direct engagement with financial companies to create a case study-based understanding of how firms respond to the grey areas. It will allow firms to share approaches and experiences confidentially. The scenario-based responses will then be used to construct common standards for market practice.

      It must involve participation from personnel employed at all relevant levels of the bank, says Roger McCormick, managing director of the CCP Research Foundation. “This has to involve a willingness to address difficult questions in the company of colleagues, who are, as far as is possible, in the same room at the time,” he says.

      Richard Hill, executive director of the Centre for Compliance and Trust, stresses the value of industry-wide standards. “By drawing together lessons from across the sector you can highlight divergence between firms, and risk areas that require more focus,” he explains. “At the moment, firms don’t know how well they’re performing against other banks, in terms of conduct. That leads to misperceptions about risks, opportunities or the strengths of the firm. At a very high level, knowing how well they’re performing should help them make better business decisions.

      “From the consumer perspective, knowing firms are getting a clear picture of the way in which their staff respond to areas where there is no rule but there is a ‘right’ way to act will hopefully help address the lack of trust between consumers and the industry.”

      The initiative comes in light of the publication of the FEMR report, and of the Banking Standards Review Council report a year earlier (which had a broader remit across the banking sector, made similar recommendations and called for common standards for market practice), and the fact that neither financial companies nor regulators currently show much inclination to address the issues they raised. Indeed, the FCA’s announcement, in December 2015, that it would not be conducting a planned enquiry into the culture, pay and behaviour of staff in the banking sector might reasonably be described as sending the wrong signal to the industry.

      So if neither regulators nor financial companies themselves seem likely to drive forward development of common standards for addressing the grey areas, the suggestion is that perhaps civil society organisations should take the lead, through initiatives such as that being driven by the Centre for Compliance and Trust and the CCP Research Foundation. Banks and other financial companies should see this as an opportunity to prove they are actively seeking to restore public trust in the sector, says McCormick: “The public have heard statements of good intentions but haven’t seen much in terms of action. If the banks continue to do nothing concrete and visible the public will remain sceptical or cynical about these statements coming out of the banks. The only way to test whether there is a genuine resolve to change is to invite the banks to participate in initiatives of this kind.”


      For more on the initiative contact Roger McCormick, Managing Director at the CCP Research Foundation, at roger.mccormick@ccpresearchfoundation.com

      To find out more about the CCP Research Foundation visit http://ccpresearchfoundation.com/

      To find out more about the Centre for Compliance and Trust visit http://www.jbs.cam.ac.uk/faculty-research/centres/compliance-trust/

       

    • Date 2015-10-02 00:00:00 +0100
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      The CCP Research Foundation has been covered in the Press recently.
      Please click here to read Roger McCormick's Interview with L'Echo, "Les banquiers ont la mémoire courte", on 2nd October.

       

       

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      The original paper Seven Deadly Sins: ‘Retrospectivity, Culpability and Responsibility’ published on April 2015, was revised and updated recently. 

      To access the paper, please click here.

       

       

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      The Queen Mary University Institute for Regulation and Ethics (IRE) at the Centre for Commercial Law Studies and the CCP Research Foundation CIC are delighted to announce that they have entered into a partnership agreement under which data and expertise will be shared and the two institutions will arrange joint seminars and other events in areas of common interest.

      Under the arrangement, which is for three years, IRE becomes an honorary member of the Foundation's Conduct Costs Project Association. Costanza Russo, the Co-Director of IRE and a Lecturer at Queen Mary, also joins the Advisory Board of the CCP Research Foundation.

      Roger McCormick, the Managing Director of CCP Research Foundation, said,

      "We are absolutely delighted to enter into this partnership with the Queen Mary University Institute for Regulation and Ethics at the Centre for Commercial Law Studies, which will open up new opportunities for our research work in the conduct, culture and people areas and strengthen our contacts with the academic world, where interest in the relationship between business and ethics is clearly growing very rapidly."

      Costanza Russo, the Co-Director of the Institute for Regulation and Ethics said,

      "We see a number of important synergies between the work being carried out at the CCP Research Foundation and the research on regulation and ethics carried out at our Institute. Both our organisations are committed to evidenced-based research and working together on topics of common interest will provide great opportunities for mutual support and ideas-sharing that will be valuable to us both."

      Details of joint seminars and other events, as well as collaborative research publications will appear on both the CCP Foundation and IRE’s websites from time to time:

      CCP Research Foundation C.I.C
      http://www.ccpresearchfoundation.com

      Queen Mary University of London, CCLS Institute for Regulation and Ethics
      http://www.ccls.qmul.ac.uk/research/regulation-ethics/

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      Justin O'Brien, George Gilligan, Alex Roberts & Roger McCormick (2015): Professional standards and the social licence to operate: a panacea for finance or an exercise in symbolism?, Law and Financial Markets Review

       

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      This paper considers how the use of professional practice is applied in Australia and the United Kingdom via the lens of professionalism in the finance sector. How can effective conduct standards, training or ethical commitment be established and maintained? What is the potential of the social licence to operate (SLTO), which is emerging as the preferred strategy of the Bank of England? We argue that the SLTO model has enormous traction for the finance industry, not just in the United Kingdom. It has global applicability. To work effectively, however, the assessment has to be outside of the sector itself and voluntarily accepted by it.

      To access the paper, please click here.

       

       

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      FCA has published a Benchmark Fines list covering the period up to May 2015 (https://www.fca.org.uk/static/documents/benchmark-fines.pdf) on which events such as LIBOR, Euribor and FX failings are recorded for several banks. In the context of our paper, Seven Deadly Sins: Retrospectivity, Culpability and Responsibility”, those events fall under the category Case 1 – ‘Clustered Criminality’. These fines of course only tell part of the Conduct Costs history for the banks in question. The Conduct Costs recorded in our International Results Table, reflect many other categories of misconduct. The detailed Conduct Costs events (including benchmark fines) underlying the International Results Table is available to The Conduct Costs Project Association Members.

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      Date 2015-06-22 00:00:00 +0100
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      Insolvency Costs Project: “Counting the Social Costs of Creditor Misconduct”

      The misconduct of banks and other creditors when dealing with small businesses can have grievous consequences, in some cases causing enterprises that may have long term viability to collapse due to short term, somewhat technical, "events of default" or ill-advised financial products that should never have been sold to them. At the CCP Research Foundation's Conduct Costs Project a great deal of work has been done on the banks' own "conduct costs", but the costs of bank misconduct extend beyond fines and balance sheets. Insolvency due to bank misconduct is undoubtedly costly to individual businesses. However, what are the broader social costs?

      The latest CCP Research Foundation Associated Research Project, focusing initially on the sale of IRHPs to SMEs, will analyse the wider financial implications of insolvency where there is a demonstrable causal connection between a clear mis-selling of an IRHP and the business’ insolvency. The Project will, in due course, also look into law reform questions raised by the associated issues, in particular, whether or not current regulation and law addresses satisfactorily the need for proper redress and "business rescue" where the cause of business failure is not the business itself but bank misconduct.

      The loss of otherwise viable businesses due to mis-selling of financial products is a phenomenon that has been highlighted in the media, but there has, as yet, been no thorough investigation into the cumulative cost of these losses. The primary goal of this study is to produce a comprehensive and forensic calculation of the costs of insolvency due to creditor misconduct.

      The Project has released its Stage 1 Questionnaire (available here) and invites businesses that meet the selection criteria to complete the questionnaire by midnight on 12 July 2015

      The full press release is available here

      For further information and enquiries:
      Heather Buchanan,
      Project Principal, Insolvency Costs Project
      E: insolvencycosts@ccpresearchfoundation.com
      T: +44(0) 1896 820 420

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      The FEMR have stated clearly that, as a “priority”, firms should explore “the scope for greater transparency over conduct...including better disclosure of fines” (Box 18, p.78).

      We would like to suggest that this exploration starts with the proposals we outlined in a recent discussion paper (published here): specifically a “Conduct Costs Report”.

      Please see the full Press Release.

      Next on the Agenda:

      Roger McCormick, Managing Director of the CCP Research Foundation remarked:

      “We have already raised these issues with a small number of banks but the response, so far, has been disappointing. Now that the need for better reporting --and greater clarity-- has been taken up by FEMR, we hope that the issues and ideas referred to above can be removed from the "back burner" and taken seriously. We shall be continuing to invite banks and their investors to develop their thinking in this area with a view to tabling more concrete proposals by the end of this year. There is much talk of better "standards" in banking. Here is a good opportunity to make a positive start in a discreet area where the issues to be addressed are straightforward and solutions should not be hard to find.”

      Catherine Howarth, Chief Executive Officer of ShareAction added:

      “It's a sad fact that millions of British pension savers are worse off thanks to the extraordinary quantum of conduct costs in the banking sector that has been passed along to shareholders including pension schemes. It's positive to see the Fair and Effective Markets Review honing in on this problem as well as the common sense solution of requiring greater clarity in reporting of conduct costs. Institutional investors holding banking stocks could usefully be more proactive in their support of improvement to the reporting of conduct costs, and we hope to see this happen in the coming six months.”

      Please contact Roger or Catherine should you wish to discuss the Proposal (details available on the Press Release).
       

  1. The CCP Research Foundation is a new, independent social enterprise vehicle, set up to foster and support a new generation of research projects on the theme of "Conduct, Culture and People."  

     

    Contacts

    CCP Research Foundation C.I.C.
    info@ccpresearchfoundation.com

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    If you would be interested in being given an informal presentation at your offices about the work of the Foundation (and/or the Conduct Costs Project) and how its work relates to your business please contact: 

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