Mark Carney, the Governor of the Bank of England, has told a group of senior bankers that dealing with the legacy of past wrongdoing is becoming the most pressing issue for the industry.

Mr Carney is understood to have discussed the growing problem of conduct risks with Douglas Flint, chairman of HSBC, Peter Sands, chief executive of Standard Chartered, and Deutsche co-chief executive Anshu Jain, in a private session at the World Economic Forum.

It followed a lunch at the Davos event at which the Governor warned that financial institutions must not see fines for misconduct as “a cost of doing business” and said only “exemplary behaviour” would restore trust in the industry.

“While regulators will fix the mechanics of benchmarks in markets ranging from Libor to FX [foreign exchange], only private individuals and institutions can reform the behaviour that has made such changes necessary,” said Mr Carney at the lunch hosted by the CBI.

“Changes to the structure of compensation will better align the incentives of bank staff and their shareholders, but not every risk can be anticipated,” he added.

Clive Durdle wrote:http://blogs.lse.ac.uk/conductcosts/2013/12/11/a-review-of-conduct-costs/

This site has £148 billion of "conduct costs". What scale is the corruption in Pakistan and Sudan?

And on CO2 maybe the current weather is also a conduct cost?

Clive Durdle wrote:

Mark Carney, the Governor of the Bank of England, has told a group of senior bankers that dealing with the legacy of past wrongdoing is becoming the most pressing issue for the industry.

Mr Carney is understood to have discussed the growing problem of conduct risks with Douglas Flint, chairman of HSBC, Peter Sands, chief executive of Standard Chartered, and Deutsche co-chief executive Anshu Jain, in a private session at the World Economic Forum.

It followed a lunch at the Davos event at which the Governor warned that financial institutions must not see fines for misconduct as “a cost of doing business” and said only “exemplary behaviour” would restore trust in the industry.

“While regulators will fix the mechanics of benchmarks in markets ranging from Libor to FX [foreign exchange], only private individuals and institutions can reform the behaviour that has made such changes necessary,” said Mr Carney at the lunch hosted by the CBI.

“Changes to the structure of compensation will better align the incentives of bank staff and their shareholders, but not every risk can be anticipated,” he added.

http://www.telegraph.co.uk/finance/news ... risks.html

I'm With Stupid wrote:It's called the Corruption Perceptions Index.

The former mayor of New Orleans, Louisiana has been found guilty of corruption and charges that he accepted bribes, free trips, and other favors from private contractors hoping to secure work in the city after the devastating Hurricane Katrina.

Federal prosecutors asserted that Ray Nagin accepted payments worth $500,000 before the storm leveled portions of New Orleans in 2005 and through the city's recovery. The jury found Nagin guilty on 20 of 21 counts against him. He sat quietly as the verdict was read as his wife wept in the front row of the courtroom.

On a related note, McDonalds has just entered Vietnam for the first time after years of being denied entry.

Call it the loophole that destroyed the world. It's 1999, the tail end of the Clinton years. While the rest of America obsesses over Monica Lewinsky, Columbine and Mark McGwire's biceps, Congress is feverishly crafting what could yet prove to be one of the most transformative laws in the history of our economy – a law that would make possible a broader concentration of financial and industrial power than we've seen in more than a century.

But the crazy thing is, nobody at the time quite knew it. Most observers on the Hill thought the Financial Services Modernization Act of 1999 – also known as the Gramm-Leach-Bliley Act – was just the latest and boldest in a long line of deregulatory handouts to Wall Street that had begun in the Reagan years.

Transparency International recently published their latest annual Corruption Perceptions Index (CPI), laid out in an eye-catching map of the world with the least corrupt nations coded in happy yellow and the most corrupt nations smeared in stigmatising red. The CPI defines corruption as "the misuse of public power for private benefit", and draws its data from 12 different institutions including the World Bank, Freedom House, and the World Economic Forum.

When I first saw this map I was struck by the fact that most of the yellow areas happen to be rich Western countries, including the United States and the United Kingdom, whereas red covers almost the entirety of the global South, with countries like South Sudan, Afghanistan, and Somalia daubed especially dark.

This geographical division fits squarely with mainstream views, which see corruption as the scourge of the developing world (cue cliche images of dictators in Africa and bribery in India). But is this storyline accurate?

Many international development organisations hold that persistent poverty in the Global South is caused largely by corruption among local public officials. In 2003 these concerns led to the United Nations Convention against Corruption, which asserts that, while corruption exists in all countries, this "evil phenomenon" is "most destructive" in the global South, where it is a "key element in economic underperformance and a major obstacle to poverty alleviation and development".

There's only one problem with this theory: It's just not true.

Corruption, superpower style

According to the World Bank, corruption in the form of bribery and theft by government officials, the main target of the UN Convention, costs developing countries between $20bn and $40bn each year. That's a lot of money. But it's an extremely small proportion - only about 3 percent - of the total illicit flows that leak out of public coffers. On the other hand, multinational companies steal more than $900bn from developing countries each year through tax evasion and other illicit practices.

This enormous outflow of wealth is facilitated by a shadowy financial system that includes tax havens, paper companies, anonymous accounts, and fake foundations, with the City of London at the very heart of it. Over 30 percent of global foreign direct investment is booked through tax havens, which now collectively hide one-sixth of the world's total private wealth.

This is a massive - indeed, fundamental - cause of poverty in the developing world, yet it does not register in the mainstream definition of corruption, absent from the UN Convention, and rarely, if ever, appears on the agenda of international development organisations.

Abstract: Conventional wisdom suggests that lobbying is the preferred mean for exerting
political influence in rich countries and corruption the preferred one in poor countries. Analyses of their joint effects are understandably rare. This paper provides a theoretical framework that focus on the relationship between lobbying and corruption (that is, it investigates under what conditions they are complements or substitutes) The paper also offers novel econometric evidence on lobbying, corruption and influence using data for about 4000 firms in 25 transition countries. Our results show that (a) lobbying and corruption are substitutes, if anything, (b) firm size, age, ownership, per capita GDP and political stability are important determinants of lobby membership, and (c) lobbying seems to be a much more effective
instrument for political influence than corruption, even in poorer, less developed countries

We challenge the conventional definition of corruption through the analysis of legal forms of corruption, and by devoting special attention to influence induced by the private sector. This paper studies the determinants of the world pattern of legal and illegal corruption by proposing a simple theoretical model of endogenous corruption and related legal framework, and its thorough empirical test. Three types of equilibrium outcomes are identified: one based on illegal corruption, where the elite does not face any binding incentives to limit corruption; one centered around legal corruption, where the elite must incur a cost to legally protect corruption; and finally a no-corruption outcome, where the population is able to effectively react to corruption. Testable implications from the model are derived based on country-wide parameters. Crucially, we use a rich corporate survey, including 8,279 firms in 104 countries, tailored for this research, and featuring measures of legal corruption that are novel to the literature. The microdimension of the database enables improving on familiar shortcomings associated with the use of endogeneity-prone, country-wide indices of perceived corruption. The empirical results, making use of a broad range of proxies and sources, generally validate the model's explanations.

our banks.

SOME HISTORY

This story begins back before the United States was the United States.

The original thirteen colonies printed their own currency, and it worked very well at empowering commerce and turning the young America into a powerful growing economy, free of the poverty and unemployment that even then crippled London. The public currency was operated as a public utility. But the bankers of Europe, long used to private banks issuing the public currencies as loans at interest, were horrified by the American approach and saw it as a threat to their deeply cherished religious belief that the gods intended for the bankers to have all the wealth of the world. So, the Bank of England lobbied King George III to impose the Currency Act on the colonies, which forbade the colonies to use their own money and required them to borrow their lawful tender from the Bank of England, at interest. This was the public currency as a private for-profit operation.

It took only a few years for this scheme to reduce the formerly prosperous and productive colonies down to the poverty and unemployment typical of London at the same time period, as depicted in the literature of Charles Dickens, among others.

While the state-run American schools teach that the revolution was about the Stamp act and the Tea tax, it was primarily the rage created by the enforced impoverishment of the Currency Act which fueled the rebellion. Why the Currency Act is not mentioned in the public schools will become apparent further on.

2. THE ORIGINAL AMERICAN ECONOMY

Following the American Revolution, the Founding Fathers reverted back to the system which had worked so well before the Currency Act.

.....

"Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by the deluge of bank paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who, instead of employing their capital, if any they have, in manufactures, commerce, and other useful pursuits, make it an instrument to burden all the interchanges of property with their swindling profits, profits which are the price of no useful industry of theirs." --Thomas Jefferson