The repercussions of the recent forex fixing scandal still continue unabated, while in fact there is a strong conviction that we have not yet reached the bottom of the pit. Since the world banking and financial crisis a strong consensus has been built that the lack of transparency and disclosure, which for long had dominated the financial industry, was actually one of the core roots of the problems that suddenly surfaced plunging most of the world’s economies into recession.
This in turn has lead world governments as well as the competent overseeing authorities to take action in order to redress the situation. We have indeed seen global efforts, for example through the Group of 20, regional efforts such as by the European Commission’s regulations, such as the EMIR, some of the requirements for which are coming into effect next week, as well as a hardening of the stance of financial regulating authorities on the localized, individual country level.
However, we feel that besides the efforts coming from above, if things are to improve substantially and risks are to be mitigated, change is also required from within. For a long-time, at least in the eyes of impartial observers, the financial industry has allowed itself to become dominated by a conflict-of interest culture. And it is exactly this culture, this outlook and this mentality that needs to change, not necessarily by imposition from higher authorities, but through the recognition of the industry stakeholders themselves, that this was unacceptable and should be uprooted and not allowed to return.
This is the only way forward that will ensure that public opinion is won back and investor confidence is regained. Financial firms should take a good look in the mirror and confess that on many occasions they have fallen into the trap of “gaming” instead of making the market in their pursuit of profit. Transparency in their operations and transparency towards clients should be viewed as a virtue and a goal to strive for, not a nuisance to be avoided at all costs.
We have all, at one time or another, become exposed to cases where firms relied on questionable practices to achieved oversized profits, employing business models that aimed at bilking their customers. This should not be allowed to continue, or return, since it was plainly dishonest and definitely unfair on the unsuspected investor, who had always thought that choosing a reputable firm to do business with was good enough a precaution to protect his/her interest.
Apparently it wasn’t, since even the most respectable members of the industry having been known to have deliberately suppressed or manipulated information, therefore misleading their customers into taking unwise investment decisions, selling them financial products that were little different than having them bet all their funds on a single roulette spin at a casino, but keeping them oblivious of the real risks they were faced with.
Putting investors in a vulnerable position and then preying on their vulnerabilities should no longer be accepted as common business practice. Banks and investment firms should return to operating on principles and not just blindly pursuit profit at all costs. Their operating philosophy should not be based on making money in any way possible and taking advantage of your client should be treated as a faux pas.
Moreover, the firms in the financial industry should rightly direct their money and efforts into technological advancements and improvements, however this should aim at creating a more transparent and efficient market all around, in ways that enhance the trading and investing experience and environment, and not geared towards the firms obtaining an unfair advantage for themselves over their clients.
Perhaps, all these thoughts fall within the sphere of mere wishful thinking. Only time will show but we will choose to remain optimistic that the stakeholders in the financial industry will indeed approach such matters with integrity and seriousness and ensure that the necessary internal changes are carried through.