In a speech today, the outgoing FSA chief said the financial crisis had exposed “significant shortcomings” in the governance and risk management of banks and added the regulator needs to address the lack of “technical skills” in boardrooms.
“Management are responsible for running firms and ultimately firms fail because of the decisions taken by their boards and their management,” he said.
“These decisions are made within a firm’s corporate governance framework.”
He said shortcomings in the risk management of firms, along with the culture and ethics underpinning them, are not structural issues but a “failure in behaviour, attitude and, in some cases, competence.”
The FSA CEO added the regulatory regime on its own cannot ensure good outcomes.
“Crucially, firms need to have an appropriate culture and one that is focused on the firm delivering the right long-term obligations to society,” he said.
“The right cultures are rooted in strong ethical frameworks and the importance of individuals making decisions in relation to principles, rather than short-term commercial considerations.”
However, he added “credible enforcement” is also necessary to ensure individuals are driven by principles rather than commercial expediency.
