Half (52 per cent) of industry bosses think that current regulation will have little or no impact on making the financial services world more stable and three quarters (73 per cent) suggest it will have little or no improvement to the reputation of the industry.
This is according to a research study released by Kinetic Partners, the global professional services firm.
The research study reflects the views of senior executives within the banking, asset management and hedge fund industries, and includes contributions from Howard Davies and Howard Flight.
Julian Korek, founding member of Kinetic Partners and one of the authors of the study, says: “The global financial services industry remains in a turbulent state and it should be of deep concern to both the industry and the various country regulators that industry confidence levels in the regulatory plans to fix the industry’s woes are so low. So much effort been expended in laying out the regulatory path – and yet so few are convinced it’s heading in the right direction, especially those at the very top. It’s an issue for all of us in the industry - not just the regulator - if people are cynical about the impact of regulation. Clarity, understanding and consistency is needed so firms can buy in to new regulation.”
Of the 88 chief executives and directors of financial services companies interviewed for the study, only 36 per cent of respondents believe that current regulatory plans will make the financial world more stable (52 per cent believe it will have little or no effect on stability and 11 per cent felt it would make it less stable). Perhaps even more worryingly, nearly three quarters of those surveyed (73 per cent) do not think regulation has any impact on the reputation of the industry.
Other significant findings of the study include:
• 55 per cent said clarity is the single most important factor in delivering an effective regulatory framework, while 30 per cent believe that single global regulatory standards are the key;
• 82 per cent said that the solution lies within existing regulation. Their argument is that by using regulation more effectively, it would strengthen accountability and rebuild trust in the industry;
• CEOs and their heads of compliance are not aligned. Just 16 per cent of the CEOs surveyed by Kinetic Partners thought new regulation would make the financial world more stable – whereas nearly half (47 per cent) of the compliance heads thought it would do so.
Korek says: “Clearly, regulation is something the industry accepts, but to be this far down the road of regulatory reform in financial services and to be seeing lack of commitment on this scale has to be a real concern to everyone with a vested interest in a stable, solid global financial system. The industry is seeking clarity of regulation above all else – and the significant minority of 30 per cent who are calling for global standards cannot be ignored. It is of paramount importance that the industry has an appropriate and adequate voice in commenting and fine-tuning regulatory proposals rather than feeling it is ‘safer’ to keep their heads under the parapet. If not, business will reach outside of their current markets to other jurisdictions that provide clearer frameworks.
“For the UK, given that the financial services industry continues to play a major role in the economy, perhaps now is the time to consider appointing a minister with specific responsibility for financial services to promote the sector within the UK and across other jurisdictions?”
Flight says: “Regulation will not restore the industry’s reputation overnight. But an understanding of how regulators envisage the shift from regulation driving stability in the short-term to slowly building the reputation of the industry in the longer term would be more likely to win hearts and minds across the industry.”