To mark my departure from The TRADE, I have been asked to reflect on my past year as a reporter looking into the issues of the finance industry and regularly speaking to brokers, buy-side firms and exchanges.
It’s important to note that before I joined The TRADE, I was a mainstream journalist working on stories for the general public and didn’t touch the realms of trading.
One of my first impressions was how guarded the finance industry is. Having contacts check quotes for stories was unheard of by me before The TRADE, but most people within the industry see it as standard. Everyone appears to be highly concerned about how they are being portrayed. Everyone appears to fear being critical of others, even when they clearly disagree.
It’s understandable why everyone is so uptight. Bankers’ collective public image took a massive blow as a result of the financial crisis, when billions of dollars of taxpayer money was used to bail them out.
Then bring in the subsequent scandals such as the London Whale and Libor, and you can understand why everyone is walking on eggshells. And the backlash doesn’t seem to end. The fines keep on coming and public outrage keeps on brewing. The latest hiccup was Barclays deciding to pay higher bonuses despite shareholder opposition, followed by a poor quarter and job cuts for its investment bank.
My guess is that for people reading those headlines – and not reading about the minute details of banking reforms such as those based on Volcker and Liikanen reports, Basel III, the Dodd-Frank Act and the European market infrastructure regulation – their perception of the banking industry hasn’t really changed.
The critical point is that most financial institutions’ business depends on trust. The relationships between brokers and buy-side firms are key and ‘trust’ is what everyone holds on to. Thus the image banks want to portray is very controlled – a slip of reputation could mean a dent to business.
Yes, there are plenty of reasons why the financial industry should be tense, but does it do anyone any good? The debate of earning back the public’s trust has been going on for some five years now, so I won’t attempt to simplify it here, but one thing is for sure, there is still a lot of work to be done.
The industry needs to loosen up and embrace transparency. And by transparency, I don’t mean pre- and post- trade transparency; I mean industry players need to stop controlling the message.
In the big scheme of things, it makes precious little difference if you delete quotes to avoid angering peers or being construed in a negative way – you said it, therefore you mean it. It doesn’t pay to refuse to comment on an issue in case you’re seen in a bad light. It doesn’t pay to have Chatham House rules at events to allow speakers to “talk freely”. People say they are concerned about getting quoted out of context, resulting in bad headlines. But in most cases, mud only sticks when there is something dirty going on.
If there isn’t sincere, open debate about some issues in the public domain, how can people learn, understand and see positive change?
The industry should get on with the job (particularly by changing its culture) in an ethical way. Once that’s achieved executives and spokespeople will have a good and honest story to tell. That’s how you gain trust. This is what people expect from the finance industry, from politicians – and journalists.