As FEMR recognised, while fines and sanctions have roles in deterring misconduct, they will not, on their own, bring about the cultural change needed. We must move from an excessive reliance on punitive ex post fines of firms to greater emphasis on more compelling ex ante incentives for individuals, and ultimately a more solid grounding in improved firm culture. This starts with reducing opportunities for bad behaviour, for example, by overhauling the regulation of key benchmarks in FICC markets. It requires compensation rules that align risk and reward. In the UK, a significant proportion of variable compensation now must be deferred for a period of seven years. To address the ‘rolling bad apples’ problem, mechanisms are now in place here to ensure that when individuals move on their history will be known to those who consider hiring them. Firms will be required to share information on breaches of individual conduct rules, their fitness and propriety assessments and outcomes around subsequent disciplinary proceedings. These measures are all very constructive but they are not yet sufficient. That’s why the Bank of England supports initiatives that ensure firms and their employees take greater responsibility – individually and collectively – for their own conduct. UK authorities have used their convening powers to encourage market participants to establish standards of market practice that are well understood, widely followed and, crucially, that keep pace with market developments. Industry has responded. The Banking Standards Board is promoting higher standards of conduct and competence across the UK banking system.

And we will consider how to maintain focus as memories fade and the temptation to turn inwards returns. We are doing so because we know that everyone has a shared interest in real markets. Real markets are professional and open. They are resilient, fair and effective, and they maintain their social license. Real markets are not ends in themselves but serve the interests of end-users. Real markets don’t just happen. They depend on private actors and public initiatives to ensure the quality of market infrastructure. That includes ‘hard’ infrastructure, the plumbing of markets that determines the mechanics of markets; and ‘soft’ infrastructure, like standards and codes that define how market participants should behave. Since the crisis, the UK has played a leading role in addressing misconduct in domestic and global markets. 1  See Fair and Effective Markets Review Final Report, HM Treasury, Bank of England and FCA (June 2015). At: https://www.bankofengland.co.uk/report/2015/fair-and-effective-markets-review---final-report  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  We know that the City has a particular responsibility given London’s position as the pre-eminent global financial centre. 2  What has been achieved? So what has been done to re-build the necessary market infrastructures for real markets to thrive? 3  In the UK, laws and regulations have been strengthened by, for example, introducing a criminal regime for manipulating benchmarks. Public authorities know they cannot and should not try to legislate for every circumstance, monitor every transaction, or anticipate every market innovation.