Bank of England's Minouche Shafik warns the City's 'bad apples'

BoE deputy governor Minouche Shafik says bankers' bad behaviour isn't due to just a few 'bad apples'. Is that the sound of the City gulping?

by Adam Gale
Last Updated: 21 Nov 2014

As if banks needed any more stress this week, the deputy governor of the Bank of England, Minouche Shafik, has condemned the ‘undesirable culture’ of misconduct that had been ingrained into the financial system, and called for a ‘comprehensive solution to fix the barrel and to get rid of the bad apples’.

When she wasn’t trotting out the metaphors, Shafik was launching a three-month consultation for the Fair and Effective Markets Review, which will investigate behaviour in the fixed income, currency and commodity (FICC) markets in the hope of restoring confidence in their operation.

She said she shared public outrage, which was ‘based on the view that the rewards in finance are disproportionate and that the system is rigged’, singling out one anonymous trader who justified Libor manipulation with the Tesco slogan ‘every little helps’.

While Shafik’s ardour might sound like bad news for the financial sector (albeit good news for everyone else, as long as it isn't completely hobbled), she was quick to point out that a lot of reforms had already taken place. The benefits of these, however, ‘are being offset by a long tail of outrageous conduct cases,’ she said.

‘These are like salt rubbed into the wounds to public confidence in financial markets.’ So the ‘reformed’ banks might be able to breathe a sigh of relief, but bankers who have yet to find salvation beware.

Exactly how far-reaching the proposed reforms of the Fair and Effective Markets Review will be is of course unknown. Talk, as they say, is cheap. It does have a wide scope, however, including incentives and penalties.

Shafik spoke positively of the UK’s proposed Senior Managers and Certification scheme to defer bonuses and make individuals face up to the ‘long-term consequences of their choices’. She might have to adjust that particular feature, of course, if the EU gets its way with the bonus cap.

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Finance

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