This has had direct economic consequences. Mistrust between market participants has raised borrowing costs and reduced credit availability. Falling confidence in market resilience has meant companies have held back productive investments. And uncertainty has meant  2  BIS central bankers’ speeches  people have hesitated to move job or home. These effects are not trivial, and they have reduced the dynamism of our economy in the post-crisis years. 1 Widespread mistrust has also had deeper, indirect costs. Markets are not ends in themselves, but powerful means for prosperity and security for all. As such they need to retain the consent of society – a social licence – to be allowed to operate, innovate and grow. Repeated episodes of misconduct have called that social licence into question. We have all been let down by these developments. And we all share responsibility for fixing them. Real markets I believe everyone in this room would agree: we need real markets for sustainable prosperity. Not markets that collapse when there is a shock from abroad. Not markets where transactions occur in chat rooms. Not markets where no one appears accountable for anything. Real markets are professional and open, not informal and clubby. Participants in real markets compete on merit rather than collude online. Real markets are resilient, fair and effective. They maintain their social licence. Real markets don’t just happen; they depend on the quality of market infrastructure. Robust market infrastructure is a public good, one in constant danger of under-provision because the best markets innovate continually.

Specifically, the Review identifies: –  Market structures which presented specific opportunities for abuse, such as poor benchmark design, and which more generally were vulnerable to conflicts of interest, collusion, and thin markets;  –  Standards of acceptable market practice that were usually poorly understood, often ignored and always lacked teeth;  –  Firms’ systems of internal governance and control that were incapable of asserting the interests of firms – let alone the wider market – over those of close-knit trading staff;  –  Individual incentives that were skewed, with pay packages stressing short-term returns overlong-term value and good conduct;  –  And personal accountability that was lacking, with a culture of impunity developing in parts of the market. All these factors contributed to an ethical drift. Unethical behaviour went unchecked, proliferated and eventually became the norm. Too many participants neither felt responsible for the system nor recognised the full impact of their actions. For too many, the City stopped at its gates, though its influence extended far beyond. A good start has been made in addressing these deficiencies. The design and regulation of key FICC benchmarks has been overhauled and transparency in FICC markets is being enhanced. Compensation rules have, in the main, been transformed to align better risk and reward. From next year, senior managers of banks and insurers will be held directly accountable for failures in their areas of responsibility. And the best firms are improving the “tone from the top”, launching conduct training and revamping control structures.