Elizabeth Corley, chief executive, Allianz Global Investors...Elizabeth Corley, chief executive, Allianz Global Investors, Seidlstrasse 24 - 24a 80335 Munich. 05.03.2012 Martin Hangen
Elizabeth Corley

Financial institutions need a private forum to share information about traders who break rules, in order to prevent “bad apples” moving from one firm to another, a group of industry specialists will tell the Bank of England on Friday.

The proposal for an industry-wide “black book” recording why traders leave a company is one of the ideas for cleaning up the City of London from a panel chaired by Elizabeth Corley, head of Allianz Global Investors.

“There is no silver bullet,” Ms Corley said in an interview with the Financial Times. “If you want silver bullets, you will need a machinegun full of them because this is a very complex market.”

Ms Corley chairs the market practitioners’ panel set up last year to advise the Bank of England, the Treasury and the Financial Conduct Authority on the fair and effective markets review they launched in response to the scandals over traders rigging Libor interest rates and foreign exchange markets.

Those scandals have prompted a wave of regulations worldwide and at home, from overhauling how benchmarks are calculated to making their rigging a criminal offence. The review intends to go further and examine whether such conduct is limited to a few “rotten apples” or whether a City culture has allowed misbehaviour to flourish.

“There is a significant public interest in cleaning things up and we have got legacy things coming out all the time,” said Ms Corley, “Everybody gets frustrated when they think they have cleaned out the cupboard and then there is something else in there,” she added, ahead of the publication of her panel’s response to the review on Friday.

Such a clean-out may require cultural change from regulators as well as from banks. Ms Corley argues that the FCA needs to take a more collegiate approach with industry, talking earlier about what practices are positive, rather than swooping when things go wrong.

“I have a lot of sympathy for the regulators . . . The challenge is how to move into regulatory development that is not enforcement-led,” she said. “That means you have to develop a different relationship with your regulators, not just in the UK, but across the world.”

Ms Corley says the key areas of focus are the structure of the fixed income, currency and commodity markets and the conduct of traders, which make up a big chunk of activity in the City and other financial centres.

She has no doubt that trader conduct is the area in need of most attention. “Changing the attitudes of managing directors and those on the first line of defence on the trading floor is absolutely key,” she added.

However, she plays down the idea of establishing a licensing regime for traders or a professional standards system requiring them to all take exams to qualify. “We are not saying it’s a bad idea but we are saying it’s not the panacea. Many of these issues we face are not technical qualification issues, they are conduct and ethical issues.”

Instead, she recommends that traders are required to make an annual attestation that they have complied with their code of conduct — preferably one that is included in their employment contract. She says the approved persons register, which is in the process of being replaced by regulators, should be maintained and improved as a vehicle for the industry to share notes on “bad apples”.

She also calls for the establishment of an industry-financed body to develop common codes and standards for the sector. Ideally, these could also be promoted globally, via the Financial Stability Board and International Organisation of Securities Commissions.

Mark Carney, governor of the Bank of England, last month alluded to increasing transparency of trades, already being tackled in certain markets by EU regulation, as something on the table. He said such transparency should not diminish liquidity; a typical gripe of the industry.

Ms Corley said there was “no doubt transparency is part of a solution”, but she raised concern about investors’ vulnerability to high-frequency traders, saying: “You become the sitting target for people who are going to use your clients’ money to make fractional gains.”

Elizabeth Corley: Crime writer with skills to sniff out real-life villains
● Joined Sun Alliance Life & Pensions straight from school in 1975 and went on to be deputy head of broker sales
● Moved to Coopers & Lybrand 10 years later before joining Mercury Asset Management in 1993
● Published five crime fiction books between 1998 and 2013
● Joined Allianz Global Investors as managing director in 2005
● Awarded a CBE in the 2015 New Year honours list for services to the financial sector

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Letter in response to this report:

Code of conduct won’t deter the bad apples / From Andrew Hall

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