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May 29, 2012

Regulators should focus on behaviour not regulation, Douglas Flint

HSBC group chairman Douglas Flint said focusing on behaviour and not regulation is the key on how the accounting profession and the financial sector can most efficiently deal with the aftermath of the financial crisis.

Flint made the comments during a speech, Hindsight of a crisis: an opportunity to improve or deceive, at the Institute of Chartered Accountants of Scotland (ICAS) annual Aileen Beattie memorial lecture yesterday.

He also said institutions are focusing on developing complex rules which may lead to unintended breaches and cannot foresee every single circumstance. The real challenge, instead, is to introduce a widespread work ethic based on trust and correct doing.

“Capital, liquidity and infrastructure enhancement will also play a role as will better governance and supervision but the greatest opportunity for improvement will come from defining, teaching, reinforcing, rewarding and enforcing values in terms of behaviour,” Flint said.

Flint stressed regulatory and public policy bodies should concentrate on understanding and shaping the culture of the financial system and care more about how individuals are screened for behavioural characteristics, when recruited or promoted.

“It is the aggregate of behaviour evidenced within the system and in particular how it has changed that will change society’s perception of banks rather than thousands of pages of wordy new regulations designed to work in theory,” he remarked.

Challenged by the 120 business-professionals over the difficulties set about by globalisation when introducing cross-boarder ethic standards, Flint said the solution is to train people, not overcome the issue.

Aileen Beattie, to whom the speech was dedicated, was executive director at ICAS where she worked for almost 20 years. She died of cancer in 2005.

 

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