UK regulator 'does ethics' this time

A few years back the chairman of the UK Financial Services Authority famously said the agency "doesn't do ethics". Howard Davies has since retired to be director of the London School of Economics, and his successors have had a rockier rock to follow. Hector Sants, the incumbent FSA chief executive, says the agency still doesn't do ethics, but then went on to show that it does, really. Davies had said it was not for "the FSA to seek to act as the conscience of the square mile", as London's financial district is sometimes known. But after a big financial crisis that saw large banks swing into government control, the FSA has been stepping up it demands to approve ahead of time candidates for the boards of financial institutions as well as those in senior operating roles. But can it change their culture? Here's a bit of his view:

I do believe that determining an ethical framework is for society as a whole, not an unelected regulatory agency. In that sense, it is right that the FSA "does not do ethics" … However, regulators have a central role to play, which should be to ensure firms have the right culture for their business model – the right ethical framework – to facilitate the right decisions and judgements and we should intervene when we find those frameworks are lacking. Finally, may I return to the central theme of trust. Trust has been lost between the financial community and the rest of society. The principal agents for restoring that trust must be the firms themselves.
Regulators have their role to play, but Sants suggested that it will take more than a regulator to fix the problem: "this goal will not be achieved without far greater recognition of the importance of this topic across governments, regulators and firms around the world."

Source document: The Sants speech gives further details of his thinking.