Changing face of regulation

It’s time for a more clear and common-sense approach to regulation, says Chris Horne, Managing Partner, Campbell Dallas.

Times sure are changing. We have the launch of Virgin’s “Bank of the Future”, we have competition regulators insisting on the sale of branches from some of the more mainstream banks and we have a new regulatory regime to try and prevent future banking crisis.

The question is, what does all this mean for the customer?

There is no doubt about it that the current banking environment means that it is harder for owner-managed businesses to obtain bank debt than ever before. When approaching banks, we are often being told now about the new regulations which banks have to follow, and this increase in regulation must surely result in banks making the easy decision to lend to larger entities rather than the traditional ownermanaged business which is the mainstay of the Scottish economy. While I can understand the increased level of regulation, are we, by regulating the industry, making it too hard for banks to give support to fledgling and growing businesses? Increasingly, it is being seen that the easiest way to get money out of a bank is not to need it in the first place!

In any industry, when the rules of the game have to be administered by a regulator surely the game is already lost? An inherent level of self-regulation is needed and I feel that responsibility should be passed down to the individual bankers, who in many cases are members of a Chartered Institute and have demonstrated their ability to make decisions. While there is no doubt that we need to take every possible safeguard to ensure that we do not find ourselves with the bail-outs needed, historically we have to rely heavily on the self-regulation and professional integrity of the banking industry.

In football, FIFA are consistently analysing the need for linesmen, assistant referees and indeed now two additional assistant referees. However, none of this will stop players from entering into the act of “simulation” and indeed none of the new regulators will stop, in my opinion, any bank from pushing the boundaries. It strikes me that we are perhaps entering a new cycle where we have increased conflict between the regulators and the industry itself. Part of this is a result of the mainstream media’s attack on “bankers’ bonuses” and the fact that for the first time in my lifetime the remuneration of the banking industry is something which the general population have a discussion about at dinner parties!

All the bankers I know are hard-working, conscientious souls who make every effort to better themselves and the notion that these people need three regulators to oversee different parts of their industry seems unnecessary to me, especially when a similar number of regulators failed to take responsibility for or indeed stop the banking crisis.

There is no consensus amongst the G20 countries about how we should regulate banking industries, and from a Scottish perspective, we must make sure that the financial services industry in Scotland is protected and it is not made too easy for financial institutions to set up in lower-taxed and lower-regulated geographical areas.

So, while I have no desire to return to the dark days of 2007/08 with banking bail-outs being front-page news, I do feel that a clearer, more concise and common-sense approach to regulation has to be adopted with more responsibility falling on individuals to make the correct personal choices when faced with difficult decisions.

As a member of ICAS, I take my responsibilities as a Chartered Accountant very seriously and know that it must demand that I operate with the highest levels of integrity in my day-to-day dealings and give consideration beyond the obvious and consider all the ramifications of my actions. I hope that, going forward, whether as a result of the increased regulation or as a result of the changing decision-making processes of bankers, the job description ‘Banker’ will once again be one which the members of the Chartered Banker Institute are proud to use.

Campbell Dallas LLP is a leading independent firm of Chartered Accountants in Scotland. The firm is the Scottish associate of UHY International. Visit the website at www.campbelldallas.co.uk. For more information or advice please contact Chris Horne on 0141 942 0722 or email chris.horne@campbelldallas.co.uk.

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