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.

The FPC and the PRA have catalysed a series of actions that influence market resilience including stress tests of banks and hedge funds, system-wide capital actions, and new tools like the leverage ratio and minimum repo haircuts. 3 Third, the Bank’s arcane governance blurred the Bank’s accountability and, by extension, weakened the social licence of markets. Before my arrival, the Bank’s governance was reshaped. The Bank’s board of directors, Court, has been strengthened. Its external members now have formal powers to observe the meetings of the Bank’s policy committees and to commission reviews into the Bank’s performance. 4 I welcome the Government’s intention to introduce legislation further strengthening the governance and accountability of the Bank. The Bank will continue to modernise its operations. Following the Grabiner report, the Bank has focused its Market Intelligence programme, strengthened procedures, improved training and overhauled compliance. And the Bank is introducing today a new code of conduct. The Bank expects its senior management to meet the highest standards of professional conduct. As one example, the Bank will apply the core principles of the Senior Managers Regimes to its own senior staff, including the Governor. This is in addition to existing obligations and scrutiny from Court, Parliament, the media and the general public. And the Bank will continue to reinforce its commitment to openness and transparency. Minutes of Court meetings are now published with minimal delay. The Monetary Policy Committee will publish transcripts of its deliberations with an appropriate lag.