Bank of England Rejected the Idea to Create a Database of Bad Bankers

  • BOE Deputy Governor Shafik says lawyers couldn’t agree on plan
  • Fed’s Dudley says in industry’s own self-interest to adopt

A plan advocated by Federal Reserve Bank of New York President William Dudley for a database of bankers who violate ethical codes of conduct has been studied by the Bank of England, but was deemed to face too many legal obstacles.

“We explored that idea,” BOE Deputy Governor Minouche Shafik told a conference on banking industry culture at the New York Fed on Thursday. “We couldn’t get enough lawyers to agree that we could do it.”

Regulators are pressing the industry to clean up its act after a series of scandals, including a conspiracy to manipulate the London interbank offered rate. Dudley two years ago floated the idea of a database of banker misconduct to halt the problem of “rolling bad apples,” whereby violators leave one firm but get hired elsewhere.

“We actually were told by the lawyers that it would be easier for industry to do it, take leadership, than regulators to do it,” Shafik said.

Dudley, speaking at the third conference on bank culture hosted by the New York Fed, said regulators should “consider ways in which new laws or regulations might help -- especially to overcome perennial collective action and first-mover problems that are common across the industry.” He also repeated his call for the database.

The BOE’s experience highlights the difficulties that regulators face in trying to improve bank culture, and Dudley echoed the sentiment that it would be better if solutions like the database were voluntary rather than imposed.

“We would like to see the industry take up this, because I think it is in the industry’s self-interest,” he said during a panel discussion in response to Shafik’s remark.

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