The main problem with regulation by statutory bodies is that nothing gets done. Witness the inquiry into the fixing of Libor rates. If the governor of the Bank of England could still raise his eyebrows, as in the days of self-regulation, Barclays would have had to act or face the consequences. During the financial crisis in the early 1970s, the main source of consumer credit was through hire-purchase companies. The governor and the Bank were worried that these companies were under-capitalised. My father, who was chairman of Mercantile Credit, a hire purchase firm, was summoned to the Bank and told to do something. Ironically, the only solution was to sell to Barclays. And witness the success of the sole surviving example of financial self-regulation – the takeover panel. Its rules continue to command the respect of all those involved in takeovers, and at a much reduced cost.
Peter Meinertzhagen is director of Oriel Securities, and spent over 40 years at Hoare Govett, latterly as chairman.
The concept of self-regulation and a “principles-based” regulatory system is now dead. The mantra for the future is transparency. This applies across the board, from the medical sector to politics. No longer will society accept that the hierarchy automatically knows best. Laws to enable greater transparency and challenge are on the statute book, the Freedom of Information Act in particular. They will not be revoked. Technology allows us to scan an unimaginable amount of data to look for wrongdoing or a smoking gun. This will only become more refined on a global scale. So those that advocate a return to the past of regulatory “nods and winks” – sweeping misdemeanors under the carpet to protect a company’s good name, or simply turning a blind eye – are out of touch. There is no going back. Society will not accept a return to the old ways.
Stuart Fraser CBE is a stockbroker at Brewin Dolphin and deputy policy chairman at the City of London Corporation.