The UK authorities have announced a work programme to scan the horizon for potential market or private sector co-ordination failures that may be damaging the fairness or effectiveness of FICC markets. 15  The authorities will seek to catalyse reforms to insure that market structures that are vulnerable to manipulation and misconduct do not develop over time. Conclusion  The examples above show how the UK has put in place a set of reforms to improve standards and ethics in financial markets. We have not tried to regulate culture, but we have used a combination of hard law and soft law to raise expectations and norms. It will take time to move from ‘ethical drift’ to ‘ethical lift’. Better regulation is part of the solution, but so is a more effective partnership between the official and private sectors to improve market practices and conduct norms. 14 15  The FX Global Code: May 2016 Update can be found at: https://www.bis.org/mktc/fxwg/gc_may16.pdf See FEMR Implementation Report at: http://www.bankofengland.co.uk/markets/Documents/femr/implementationreport.pdf 7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7  References Angeli, Marilena and Gitay, Shahzad (2015), ‘Bonus regulation: aligning reward with risk in the banking sector.’ Bank of England Quarterly Bulletin, 2015 Q4, Volume 55, No. 4, available at: http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2015/q4.pdf. Bank of England, ‘Senior Managers Regime’, http://www.bankofengland.co.uk/about/Documents/smr.pdf Bank for International Settlements – the Foreign Exchange Working Group (2016), ‘The FX Global Code: May 2016 Update’, https://www.bis.org/mktc/fxwg/gc_may16.pdf Cullen, Jay (2016), ‘A Culture Beyond Repair? The Nexus between Ethics and Sanctions’, Just Financial Markets, Oxford University Press, ed. Herzog.

‘Hard law’ and ‘Soft Law’ We cannot expect misconduct to never occur in financial markets – history has taught us that there will always be individuals prepared to do the wrong thing if there is a reward. But we can reduce the frequency and severity of misconduct and we can increase the likelihood that it will be detected and punished. Given how quickly financial markets evolve and the practicalities of regulation, this can best be achieved by a combination of ‘hard law’ (legislation and regulation by the official sector), ‘soft law’ (codes and standards defined collectively by market participants), and culture (norms and practices created by firms’ Boards and management). The authorities obviously have a role to play. Regulators must introduce rules and regulations to enforce minimum standards of conduct, hold individuals to account for their actions, and put in place incentives to promote good conduct. But hard law is not enough. Even in jurisdictions with a preference for ‘hard law’ solutions, issues of interpretation and norms arise. Regulators cannot police every market practice, especially in fast moving markets, nor can they dictate a firm’s culture. However, authorities can use their convening power to bring together market participants to solve collective action problems, set expectations on behalf of broader society about expected behaviours and provide incentives to encourage adherence to voluntary market standards. This is where industry leadership is vital.