Banking and Finance: A Global Perspective
William C. Dudley, President
Reforming the culture of banking is necessary to support the long-term health of our financial system. Without good culture shaped by appropriate incentives, we can’t have the consistent good conduct we should expect and deserve. We cannot continue on the present course. We know this, the public knows this and so do many in the industry. Continuing instances of misconduct highlight the need for attention to this issue and raise the question of whether the largest firms are “too big to manage.” I remain convinced, however, that when the will is there, meaningful improvement is possible.
On Thursday, October 20, the New York Fed will host its third conference on reforming culture and conduct in the banking and financial services industry. The theme of this year’s conference is “Expanding the Dialogue.” We’re doing that in a number of ways: seeking different points of view and exploring new dimensions of the issue, building on the lessons learned from the prior two conferences and fostering greater awareness.
The aim of our conference is not to generate a series of facile answers. This is a complex issue, which warrants continued discussion, analysis and different perspectives. However, discussion cannot be used as a delaying tactic. The industry must continue to make demonstrable progress. A more ethical culture is an imperative that benefits all of us.
In addition to hosting the conference, I will be moderating the first panel, titled Finance and Society: A Global Perspective. I will be joined by Norman Chan from the Hong Kong Monetary Authority and Minouche Shafik from the Bank of England, who bring to the discussion their considerable experience in major global banking centers outside the United States. We are looking forward to addressing several critical questions:
What is a reasonable expectation of good behavior — and a good culture — in banking?
What qualities should we look for in a well-designed incentive system?
What is the role of a firm’s leaders?
What is the role of the official sector in helping to reform the culture of the industry?
One issue in particular we will discuss is the need for firms to have incentives that focus on maximizing the long-term ‘enterprise’ value of the firm — both to its shareholders and society — not just the short-term share price.
I look forward to our discussion and the rest of the conference. This is an important and pressing issue. Banking faces many challenges. Chronic misconduct does not have to be one of them.
William C. Dudley is the president and chief executive officer of the Federal Reserve Bank of New York.