The FOA’s Anthony Belchambers argues that financial services sector needs to be seen to be prioritising customer interests

Anthony Belchambers founded the London-based Futures and Options Association in 1992, following his time as general counsel of the UK Joint Exchanges Committee, and company secretary and general counsel to the Association of Futures Brokers and Dealers. At AFBD, he played a major role in securing the licensing of the first UK regulatory authority to cover derivatives. Belchambers initiated the establishment of the associate parliamentary group on wholesale financial markets and services. He is a barrister by training.

Ethical Corporation: What do you think the financial turmoil of recent years has taught us about banking ethics?

Anthony Belchambers: There are two things that spring out of the recent crisis. The first is that the emergence of a complex framework of regulation resulted in individuals outsourcing their business conscience to compliance. As a result, externally-set rules crowded out the need for a more principled approach. The second issue centres on ethical codes. In the run-up to the crisis, there were plenty of these codes around. However, the pre-crisis world – and by that I include both the consumers and providers of financial services – tended to be driven by performance returns. Ethical codes became a secondary consideration and, in some quarters, were viewed with considerable cynicism. If we are to restore public confidence and regain customer trust, business conduct codes will have to be more strictly enforced.

Ethical Corporation: So you’d like to see the enforcement of more robust ethical standards then?

Anthony Belchambers: That’s right. Rules alone cannot guarantee proper behaviour. There will always be situations where judgments will have to be exercised, and that’s where business consciences have to kick in. There are a number of initiatives under way to come up with a common set of ethical standards. For example, there are the Lord George Principles, which have been adopted by the bankers’ own livery company and the Chartered Institute for Securities and Investment. However, it still comes down to the internal culture of firms and a readiness to enforce principles of this nature.

Ethical Corporation: From an ethical perspective, what’s needed to win back confidence in the City?

Anthony Belchambers: Let’s be clear about this: most firms do prioritise customer interest and relationships, and we must be careful not to visit the failings of the few on the many. That said, the public needs to see a real post-crisis shift towards higher prioritisation of customer interests and relations as well as a better re-appraisal of risk/reward measurement in new and existing business lines. However, it is for the financial services sector itself to take the lead on this – and be seen to be taking the lead – rather than the Financial Services Authority [the current UK financial services regulator].

Ethical Corporation: Do you think the culture of the City has changed in recent years?

Anthony Belchambers: Since the crisis, yes I do, but I repeat the point that it will fail to convince if we leave this to the regulatory authorities alone. We have seen better recognition of the importance of good customer relations and a new approach to governance with, for example, non-executive directors having a stronger role to play. However, it needs to be remembered that customer and shareholder pressure on financial institutions to outperform the norm remains intense, particularly in this climate. And high performance usually carries high risk. As with most things, it is a question of balance.

Ethical Corporation: There’s a lot in the press about bankers’ bonuses. Can we expect huge payouts to continue?

Anthony Belchambers: This is a highly competitive sector, so remuneration must be equally competitive. However, new measures, such as deferred payments of bonuses and tougher “risks run” assessments, will lead to a more balanced approach. Then, of course, there is the impact of the current economic climate, which will exercise a downward pressure on the size of bonuses. So, no, I do not expect huge payouts to continue.

Ethical Corporation: What’s your position on a financial transactions tax (FTT), the so-called Tobin Tax?

Anthony Belchambers: I can see its attraction in terms of political populism, but the Swedish experience of a comparable tax was so disastrous in terms of migration of business that it was withdrawn within a matter of years. It’s also a complete fallacy that this kind of tax will achieve any of the benefits that have been attributed to it. Aside from the risk of the business migrating to non-FTT jurisdictions, to the extent that it stays within the jurisdiction, the tax will just be passed on to customers and other end-users. As such, it will become a tax on growth, pensions, savings and investment and risk management. For London, as a major financial services centre, it will be the question of a 60% payout and a 5% return, and a major loss of business, all of which we really don’t need, particularly now.