from ‘ ethical drift ’ to ‘ ethical lift ’ : reversing the tide of misconduct in global financial markets remarks given by minouche shafik, deputy governor, markets and banking panel discussion at the federal reserve bank of new york conference on ‘ reforming culture and behaviour in the financial services industry ’ 20 october 2016 all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx introduction misconduct in financial markets has existed for as long as commerce has existed. thousands of years ago, chinese merchants found ways to hide trading profits through a variety of financial techniques. from the great south sea bubble in the 1720 ’ s to the mis - selling of railway stocks in the mid - 1800 ’ s through to more recent events such as the collapse of bank of credit and commerce international and the failure of barings in the mid - 90 ’ s – we have had a long and inglorious record of rogues, fraudsters and embezzlers in the financial services sector. but the wave of misconduct which has emerged in the aftermath of the financial crisis suggests that “ this time is different. ” the magnitude of the misconduct fines is indicative of the scale of the problem : since 2009, uk banks have paid almost £35 billion in fines and redress costs, roughly equivalent to the private capital they have raised in the same period. the global picture is even more unsettling – the roughly $ 275 billion in legal costs for global banks since 2008 translates into more than $ 5 trillion of reduced lending capacity to the real economy. never before has misconduct occurred so systematically, in such a scale and across multiple jurisdictions. clearly it was not the case of a few bad apples, but something was rotten in the entire barrel. a combination of factors caused “ ethical drift ” across the industry where bad behaviour went unchecked, and became progressively more widespread and accepted as the norm. market structures ( such as poorly designed benchmarks, unmanaged conflicts of interest, and possibilities for collusion ) presented opportunities for abuse. systems of governance and control focused on second and third lines of defence that were weaker than highly profitable and powerful trading desks. weak market discipline, particularly from the buy side, meant that poor market practices were allowed to continue. remuneration and incentive schemes stressed short term returns over longer term value enhancement. and finally ; a culture of impunity was prevalent because of a perception that the likelihood of being caught

philip n jefferson : on the assessment of current monetary policy speech by mr philip n jefferson, member of the board of governors of the federal reserve system, at the " how to get back on track - a policy conference ", hoover institution, stanford, california, 12 may 2023. * * * accompanying charts of the speech good afternoon, everyone. thank you to the organizers for inviting me to speak. it is a pleasure to be here. i welcome hearing diverse views on how to best conduct monetary policy, and this conference is certainly providing an invigorating debate on that topic. before i begin, i want to address quickly some news from this morning. i am deeply honored by the trust president biden and vice president harris have shown me with the nomination to be the next vice chair of the board. i am humbled by this extraordinary opportunity and thankful to my colleagues, friends, and family for their support. turning back to the conference, as i join this debate, let me remind you that the views i will express today are my own and are not necessarily those of my colleagues in the federal reserve system. introduction the title of the conference " how to get back on track : a policy conference " is potent. its intent and ambiguity are striking. first, the title presupposes that u. s. monetary policy is currently on the wrong track. second, the webpage for this conference advances a puzzling definition of the phrase " on track. " how so? according to the hoover webpage, " a key goal of the conference is to examine how to get back on track and, thereby, how to reduce the inflation rate without slowing down economic growth " ( emphasis added ). 1 as this audience knows, there are macroeconomic models that permit disinflation with no slowdown in economic growth, but the assumptions underlying these models are very strong. 2 it's not clear, at least to me, why such a strict metric would be used to assess real - world monetary policymaking. third, the definition of " on track " in the title contrasts with more commonplace definitions such as " achieving or doing what is necessary or expected, " as offered by a standard reference such as the merriam - webster dictionary. 3 my view is that this commonplace definition provides a more practical lens through which to assess real - world policymaking. against this semantic backdrop, i will begin my remarks with my perspective on the current inflation and economic situation. then, i will