ONCE MORE WE MUST REBUILD TRUST IN OUR FINANCIAL SECTOR
ANY elasticity in tolerance for breaches in financial standards tends to have disproportionately disastrous consequences. Considering the price our country has already paid for failures in such oversight, one might have hoped we would be spared further hard lessons. Yet the revelations about the highly questionable behaviour at Davy left many aghast. However, the decision by the National Treasury Management Agency (NTMA), to withdraw the stockbroker’s authority to act as a primary dealer for Irish Government debt, should have shocked no one. The treasury had little choice.
It was merely reacting to the grave findings of the Central Bank. It was all about damage limitation. Anything that could tarnish our name on international bond markets had to be met head on. As the agency observed: “The NTMA believes that the behaviour described in the Central Bank findings falls substantially short of the standards expected from market counter-parties, peers and colleagues in the bond market and is potentially damaging to Ireland’s reputation as a sovereign issuer.”
Minister for Public Expenditure and Reform Michael McGrath had somewhat flagged the move by saying at the weekend the NTMA regarded Davy’s action as an unacceptable breach of trust. The Central Bank’s view seems to have been damning. The personal financial gain of executives appeared to have been given greater weight than Davy’s regulatory obligations.
If words like openness, transparency, and accountability are to have any real credibility in corporate Ireland then such acts have to be taken seriously; and those responsible for breaches must face the full consequences.
Davy’s initial response did not seem to reflect the import of what had transpired. The wider concern would be that such questionable standards might somehow be regarded as acceptable. A full independent investigation is now essential. What is the use of having codes of conduct and the highest ethical standards unless they are respected? While no one should be scapegoated or targeted, it is critical that there is sufficient oversight and buy-in to grass-roots cultural change.
The Central Bank has a pivotal role to play in guaranteeing executive accountability and it must be zealous in doing its duty.
We cannot risk collateral damage or contamination across the financial sector due to allegations of lax or casual compliance. It has been said while laws control the lesser man, right conduct controls the greater one. In the world of businesses that might be even more so. As George Bernard Shaw once argued: “Your word can never be as good as your bond, because your memory can never be as trustworthy as your honour.” Sanctions and fines are necessary. More heads may well roll.
But in the wider context and in the longer term, it is vital that we see evidence of a voluntary and committed resolve to address all corporate governance concerns in the financial sector.
Rebuilding trust and confidence in the sector depends on no less.
What is the use of having codes of conduct unless they are respected?