 Well, we've spent the first part of the morning focused, understandably, on the safety of the banking sector, the resilience has been built up in terms of bank capital and bank liquidity and all of these important prudential issues. This panel, and I'm delighted to be joined by Somir Bavta from Credit Suisse and Kerstin after Jognac from the ECB supervisory board to talk about bankers' behaviour and the extent to which banks' governance can help the ethics in the sector. Specifically, how can we strike the right balance? That's the title of the session. Somir, if I could start with you. I suppose a casual observer of the banking sector over the past 10 to 15 years might be forgiven for thinking that banking and ethics is somewhat of a mutually exclusive issue, slightly oxymoronic. What would you say to that? Can governance step in and protect ethics? So I guess to the first question, is it an oxymoron? I think certainly when you look at and you made a comment in your introductory talk about the prudential nature, well actually conduct cases have actually become a safety at soundness issue for financial institutions. A recent history with the level of fines and significance of fines, there are estimates of upwards of 350 billion that have impacted financial institutions. So clearly I think everyone is focused on addressing it. Ethics plays an interesting and important role when it comes to any corporation, any entity. Obviously banks have a number of differentiating factors in terms of protection of public trust, fiduciary responsibility to our clients, and I think I would say it's not an oxymoron. I would say clearly we have a long way to go to address the ethical dilemmas and ethical issues. That's why we had such a focus recently on the culture of financial institutions. But when I was preparing for one of these speeches previously, I looked back at banking scandals. They have existed as long as banks have existed, even if you go back to the early foundation of banks in the 15th century. And in fact one of the CEOs at a bank that I used to work at said he's often asked this question, is the behavior of bankers worse now than it used to be? And he said, are you kidding me? We were scoundrels back then. We wouldn't trade unless we had inside information. It's just that there are rules now to forbid that. Now that might be an extreme view, but I think it is a tough nut to crack because it is human behavior. And the whole debate and discussion around culture, and we will discuss that, and I don't want to belabor the point because this is supposed to be interactive, I think, is that I think only through sharing best practices, exchanging views, encouraging what we think are really standard setting types of behaviors can we actually help to solve the problem. It won't be ever eradicated, just as fraud cannot be. But I think that we can collectively achieve betterment for the industry and ultimately are the public trust. We'll build on that thought in a minute, but just before I come back to you on that, I just want to bring in Kastin here and focus on what governance can do, how important can good governance be in preserving ethical behavior. I'm not just talking about regulatory scrutiny, I'm talking about internal governance within the banks. I think it's rather disappointing that ten years after the financial crisis, banks are still, I mean, the public doesn't have trust in the banks. I think there has been two waves. First there was a wave of banks taking too much risk and there were a lot of losses in the banking industry. And then we have had a second wave of criticism from the public very much linked to institution-specific scandals. So I think this is all about behavior, banks' behavior, and that is governance, I mean, how well the board and the management can steer the organization and what sort of framework they are establishing to get the right tone in an institution. And if you look at, there are many different indicators over how well banks are perceived by the public, but I think it's very clear that the trust in banks are still very low after the financial crisis, and there is probably a lot more to do. And I think therefore it's very interesting that we have this on the agenda today because I think this is something that both regulators, supervisors and the banks themselves have to work a lot upon in order to strengthen trust. Because if you don't have trust, as the chair was saying this morning, then you're probably out of the market after a while. Well, yeah, that's a key question, I suppose, is what we've seen remarkably, I suppose, despite all of the scandals and of the financial crisis that actually the banks have been able to hold on to the vast majority of their business. Even though this trust has been fundamentally shaken, it hasn't really, and despite huge competitive threats from, for example, the technology sector and so on, banks have actually managed to retain their core businesses to a large degree, even if profits are down because of other issues, the business has been remarkably resilient. Why do you think that is? Well, you alluded to competition. I think that there's still recognition, so first of all I think if there is true competition and true alternatives, which I don't think are fully developed yet, we will see what the ramifications are. But I think that banks still serve extremely important roles in the economy in general, and I don't think that that's going to go away, financial intermediation and the value that banks provide obviously is still incredibly significant. But I would like to maybe turn to another point, which is governance, and it's ironic because if you look at the developed economies and the developed financial institutions versus, let's say, emerging markets, the crisis, especially governance failures, were by and large of those banks in jurisdictions that had the most developed governance programs, the most sophisticated frameworks and policies. So, there's been a lot of written, a lot that's been written about it. So the question is, what is it that really is at the crux of the issue? And I think this discussion about culture, culture can either enhance or completely undermine governance. It's how you actually implement governance and is it in fact sustainable. So I think this is very important. Just to have a tick the box as we know doesn't ever work. So you can have policies, but unless they're really truly implemented not only by the literal terms, but in the spirit of what it's supposed to be aimed at, it will not work. So that means not just putting up posters saying what you believe in all over your headquarters means actually the behavior of senior management and the board and so on is reflected. Yes, I think it's bored. I mean certainly the regulators and I think banks all are looking to the composition of board members. If you look at large financial institutions, for example like Credit Suisse, where I work, the activities are incredibly, incredibly complex. How is it that a board member that is not from the financial industry, let's say an independent board member from another sector, pharma sector, can understand the complexity of what we do in order to ensure that there's appropriate direction on risk, for example. I think there's been a lot of focus recently on making sure that board representation is diversified, that there's a lot of experienced individuals on boards and also that the level of information and transparency and escalation that goes to the board is enhanced. You mentioned diversity. Is that an important safeguard in your view, do you think? I mean it's been said a million times now that if the people running Lehman have been Lehman sisters and not Lehman brothers, then it wouldn't have collapsed in the dramatic way it did. A more balanced approach to risk management but also controls might help ethical behaviour as well as risk appetite. I think this is a very broad question and I mean we have as supervisors we are assessing all the board members and the CEOs and in many countries also the main function holders. And we have a broad list of issues that we are looking into. We are making around 2000 assessments a year. We look of course at experience knowledge, really look at criminal registers. We are looking at if there are any tax issues that could create a reputational risk. We are looking at conflicts of interest and also of time commitment. I mean if you are on the board of a very big bank you'd really need the time to be in the details of everything. But then it is of course also the composition. If you have 10 people with exactly the same profile that wouldn't make sense because then there may be blind spots. So you need a relevant composition and you need people with different knowledge and different experience. IT is such an issue that we are discussing quite often because it's important that there are members of the board who have enough knowledge in IT and how to develop the bank's activities. How to identify the risks and how to follow up and make sure that you have a good information system that provides a board regularly with the development and the risks. So we are trying to do a lot here but I mean from our perspective we are approving those persons of the 2000 assessments we are doing around 30% of the cases. We intervene and have a discussion with the banks and with the candidates. But that is I mean to approve persons is just the first step. Then the excellence in governance it comes in the boardroom where the board works together and where they have to really set the standard which will then have to be implemented throughout the institutions. It sounds like this is an increasing focus for the ECB, the kind of abilities of the board. How you mentioned there the proportion that you asked questions of in terms of the proposed appointments. What proportion do you reject? I mean when we are being more intriguing going into details, asking about do you really have enough time for this as you have six other boards and maybe at the same time you are a CEO of a larger firm then people are rather often withdrawing. So when you have the papers on the table and you understand the view of the supervisors there is the most I think usual thing is that they withdraw and they are providing another candidate. But we have also taken decisions but it's not so usual. So I mean I wanted to come back to the interesting kind of historical point you made about bankers being scoundrels. Just because they've always been scoundrels obviously doesn't make it a good thing now. But I just wonder in terms of comparing bankers with other professions, other comparable professions. Is it just the proximity to money that it makes it more challenging to maintain ethical standards in bankers? Well it's really a perennial debate right so this has been intensely discussed and debated as to what is the role of incentivisation, financial incentivisation in encouraging poor conduct, misconduct. I think, well there are varying views of that. I mean so the question is, is there a direct correlation? If so how do we address it? I think the question is, is there a direct correlation? It's interesting because it reminds me of another quote which is one of the senior executives in the pharma industry that was on one of the boards of the banks that I worked at said. Do you know the number of hours that I spend discussing compensation per year with my management team? I said I don't know probably like let's say 20 hours, 30 hours? No, 2 hours. How much time do banks spend? You have a compensation committee management discussions on compensation. Now obviously well in excess of the couple hours. How important is compensation to what attracts people into the industry? Which is another interesting question. If you, those of you who have children or no younger generations, I'm not sure banking is such an attractive field if you're motivated by things other than money. I mean I'm not speaking for necessarily credit suist. I first went into the government and in fact I had this discussion last night with one of the other speakers. My motivation, it was clearly in my mind, it was not financial motivation, it was doing good, it was a higher social purpose. I went to government and I wasn't necessarily impressed there with let's say the ethical compass in which banks they decided to take enforcement actions versus others and I saw just proportionate focus on foreign banks as opposed to US banks. Some of that hypocrisy still exists. You could call it hypocrisy or prevalence for protecting the local entities but in any event I think it's hard to say if that's the root of all evil. I think interestingly if you look at the, because there's different schemes to address that problem, right? So tying it to long term sustainable profitability, deferred compensation, malice, clavax. And interestingly also someone said once that the bank that had the oldest scheme of deferring compensation, of equity based compensation and I didn't know this was Lehman. And I'm not saying that once again there is a correlation I think but is it something that is the root cause of all the problems? No, I would not say so. I think the interesting point about Lehman is I think they had the highest equity ownership among staff of almost any bank but of course that's an incentive. If you don't consider the downside risk that's an incentive to just take more risk all the time with the upside in mind I suppose. And I think most people would agree that a lot of the structural reforms that have happened both within banks and enforced by regulators has taken away some of that one way bet risk. However, the bottom line is that the amounts of money that people are paid is still very high and totally out of whack with the profitability if you think of the balance of the share of the spoils between shareholders and investors generally and staff. It's skewed in banking to kind of pre-crisis levels in a way that it isn't in other sectors and I don't know how sustainable that is. Well, I think regulators are clearly putting a lot of pressure on financial institutions on compensation, right? So obviously if they're not profitable they're saying how is it that you align profitability with the fact that you're paying these tremendous bonuses. There's public disclosure requirements of compensation. There's a lot more shareholder activism on compensation. I think ultimately it will require, there have been on the periphery suggestions and proposals here already for, but I think that they'll have to be at some point probably a fundamental policy rethink. And whether you can regulate it or is it just like, as long as you have shareholders or banks. The other question is should banks, and this is not something that we can dictate, but should they be privately held or is part of the problem that we are public corporations, right? That in and of itself adds interesting incentives. Yes, you're suggesting Jeremy Corbyn in the UK might be at the right model. Nationalisation is the way. I'm not saying that, but people can see the obvious inherent potential conflicts, right? More regulation of pay. Is that the answer, do you think? Because obviously in Europe there's already been more efforts in this area than most parts of the world in terms of the bonus cap. Although many banks would argue this has not really had the desired effect. It's not kept a lid on pay. It's actually just meant that more fixed pay is part of the total package and making structures less flexible. Maybe there's more that regulators could do as well as politicians. That's possible. I mean money is a driver and if you can earn more and maybe you are overseeing a little bit the risk that is in the products you are selling. But I think from the supervisor's perspective it is a broader perspective. Over the last four years we have made a horizontal review of the major banks in Europe, checking for example the framework for banks risk appetite because it's important that at the board level they have a discussion and that they are taking a decision on how far would we like to go on risk and what sort of risk do we want to have in this institution. And when we made this first horizontal review four years ago there I think there were very very few institutions or banks who had that framework in place. We have made a follow up on that now and we can see that most of them now have risk appetite framework in place but there is still more to do in this area and this includes of course also remuneration policies. Another area where we have also reviewed over the last four years is to what extent the board has enough information on the risks and the risk development and on the remuneration system. And there are international standards in this area from the Basel committee which we are having as a benchmark. And again we were rather surprised when we made this review that there were very few institutions where we could see that the board had enough information to assess the risk and also to challenge the senior management. So I think this is our perspective that we would like to see the board more active to have a competence and knowledge to really challenge the management in order to make sure that we have a sound and prudent development in our banks. More broadly, without wishing to do a marketing stunt for the FT, we've recently talked about the need to reset capitalism. It's been a big project that we've run. And I think that reflects a broader sense in the world arguably that unadulterated kind of shareholder value as a concept has maybe run out of road. To what extent do you think that is an important part of the way banking needs to change if indeed you agree? And how does that broader focus on stakeholders get reflected in the way you manage the business? So I think, first of all, I think they don't necessarily have to be an opposite. So you can pursue sustainable profitability still aligned to your values and ensure that they're sustainable because that's what actually ends up to be sustainable to ensure that it's based on principles of integrity. All of the banks have codes of conduct, fairness and dealing, ensuring that customers are well aware of the risks that they're incurring when they invest in a product, that we maintain our fiduciary responsibility to financial institutions, we reveal and disclose conflicts. So all of these things in ensuring that we banks comply with rules and regulations, both as I said, not only the letter of the law but in the spirit of the law will end up being obviously sustainable profits. So I think it is something that on the periphery people struggle with and going back to I think the comment also that Kristen made in terms of the level of information that's going to the boards. If you look at, it's interesting to look at the recent AML cases because there's such structural fundamental deficiencies that no one questioned. So for the Estonian branch, I mean the language of the reports, we're not even understood by the managers. We're talking about Danske Bank. Yeah, Danske Bank, yeah, exactly. So here the controls, in order to ensure sustainable growth, you're saying you have to comply with regulations, you have to know your business practices, you have to properly risk manage. Even if you have the systems and a lot of banks don't even have the aggregate systems to look at clients across locations, I mean there may be legal or regulatory restrictions. But if you think about onboarding, so for example, and maybe I'm diverting but for Switzerland they discontinued for the most part business with US clients. So how is it that they knew that a US client, if they were off-boarded in Zurich, would not be onboarded in Singapore or in Brazil or Mexico. A lot of the bank systems, and setting aside, as I said, any bank secrets or client confidentiality or legal regulatory restrictions, do bank systems even enable banks to be able to, on an aggregate basis, have a single view of clients, a holistic view of clients. How are you supposed to as a bank mitigate and manage your risk unless you know what you're exposed to? You may have even different ways of identifying the same client or related parties of the same client. So let's not even talk about individuals or corporations, we know how complex these relationships are. So when you start getting into the detail, it is believing in what we're doing. So going back to the analogy of the board member who said, our people are motivated at finding a cure for a disease. What are bankers motivated by? Bankers should be motivated by ensuring that we are delivering to our clients, right? That we're protecting the trust that the public has placed in us for a variety of reasons. Is that what really motivates people? How do incentivize people to do that? So it's not only the stick, but also the carrot, right? So there are examples of incentivization during the US case where client advisors had to exit clients. Obviously, their pay they thought would be affected. So in order to neutralize that, a lot of the banks said, if you have exiting clients or indicia of US persons and you investigate and you find out that it's a US person, we're going to neutralize the effect of that. So you actually will not be penalized. It's as if you still have that client. So there are many things that banks can do to neutralize the effect of incentivization. More broadly, how long have you been in your current role? Two years. That example that you gave of governance failings in terms of structures, awareness of another bank practices in one division, I suppose highlights that in global banks, increasingly complex banks, the question of are they too big to manage, are they too big to govern is still a big question. I'm just wondering in your two years, what changes have you seen to improve the governability of your institution? I think so, and this is something that we've talked about also, the three lines of defense. The stature of risk and control functions, compliance for example. So this is extremely important. Once again, insincerity, genuinness of valuing compliance and risk and ensuring that people in compliance or the second line of functions are appropriately remunerated. You have to attract talent. It's the same with regulators, by the way. I had this discussion recently with the senior person at DFSA and he said, we pay our regulators really well. We want to incentivize good people. Money isn't the only driver, but it's very important. Stature, status of the control functions, participation at the senior most levels of management of an organization, and also just participation in the discussions. All of us working at financial institutions know exactly whether control functions are respected or not. It doesn't mean that you just have to be invited to the formal governance forums. It's whether the business calls you up and says, I need to run something by you. It's whether you are involved before a decision is made on strategy to actually advise and make sure that the business wants to hear what you have to say. Is that happening more now? It's definitely happening more. I would say that the stature of compliance was significantly enhanced as of the last couple of years, three years or four years. It's very important to see compliance as an asset, not only as a cost. Actually, I think at one of the recent Credit Suisse investor days, it was the first time that the head of compliance actually talked at the investor day. Because if you look at the reduction of shareholder value and the stock price, it is so much driven by financial misconduct and non-financial misconduct that if compliance is strengthened and you really have a solid risk management control framework, you can preserve shareholder value. Kerstin, those structures empowering those compliance people, paying them enough and paying regulators enough. Are you paid enough? That's clearly an important thing. What do you look for when you are considering how well-governed risk functions are in institutions? We were alluding to the Dansker Bank failures and the fact that people just didn't know what was going on in this Estonian branch. But I'm sure that's not an isolated instance. I'm sure there are knowledge failures across a lot of different banks. How do you spot them and get ahead of that before it blows up into some big scandal? I think we can all take the wrong decision. I think that's for sure. You can take the wrong decision on a customer and that's why supervisors are insisting that there should be enough capital and liquidity in a bank. But I think it is another thing if decisions are not taken by accident but you are intending to do something that you are not allowed to. I think here banks are a little bit like democracies. You need strong institutions in democracies and in banks you need a very strong framework. That leads me as well to the free lines of defence because the first line of defence is a business area. Here we have a strong focus in our supervision on how well the business areas are assessing the risk in comparison to the profits. I think here there is more to do. This is a core part of supervision. The second line of defence is the compliance and risk management functions. I think here there has been substantial development over the last years. The number of compliance offices is much higher now in most banks. I think at least from my home country I can see that they are rather well paid because the resources are scarce in the market. We can, as supervisors, see that they are also digging into a lot and they have the risk focus. They are developing the methods also to measuring risk in a better way. Then you have a third line of defence with the internal audit and there we can also see that progress is coming. We think more can be done in internal audit. That's probably not the case just in banks but in all kind of firms that we need to develop our thinking. We also need very good people in the internal audit functions who understand the business and who are able also to report to management and to the board that they can report in a way that really makes a difference and that can also help management to make changes if needed. Somir, Kerstin has talked about there the massive build up of resources in these internal departments. Of course that's one of the many reasons why banks are showing slimmer profitability these days than they used to. This is a massive overhead. Has it gone too far? I don't think it has gone too far. I think what we will see is a bit of an adjustment because of technology actually. I think that, as you also alluded to Kerstin, I think what is happening is we need a lot of humans to process the data, to analyse, to do due diligence. I think with the advent of a lot of these monitoring and surveillance tools, we will also be able to probably reduce the humans needed to analyse the data. I think as we start seeing, I mean I was giving the example of having a holistic client view, once again a lot of this is analytical based and it can be process driven, it can be application driven. I think that that will ultimately reduce compliance spend in terms of human spend. I think that the dedication to the compliance function as a whole, be it by technological means or by humans, will never diminish. I don't see the industry getting to a place where there will not be some type of conduct. As I said, because when looking back at history, it has been throughout its inception, it's like saying are people going to cheat and defraud and how to prevent that. There will always be incidents. The question is the reduction of those incidents. I just wanted to touch on, obviously we could spend hours talking about climate change, but I just wanted to touch on this area because you talked about sustainability of business models. Arguably the broadest definition of sustainability brings in the fundamental question of how sustainable our world is and to what extent climate change threatens that. When you think about the ethics of banking and the way to balance priorities, how does that figure in your thinking? I think it's very important. I think banks serve a very important social purpose. If you look at even the cases that I alluded to before the tax evasion cases with the Swiss banks, the US IRS could not go after because they didn't know who they were, the individual US citizens. They have to go after the intermediaries that had the bank accounts. So it's the same thing. We are intermediaries. We enable or we do not financing of industries that may damage the environment or that may pollute the environment. So I think that banks do play a very important role in that. I think that overall and there have been various groups of regulators and I think in the UK in particular started by Carney, which are very, very vocal in this area. And you've seen, I think, tremendous support among financial sector. Not just from an ethical point of view, actually from a financial risk point of view, the exposure to stranded assets and so on. And it's an absolute critical component of risk management, absolutely. Where do you kind of fit into this? We talked about regulators are starting to shout more about this issue. How do you think about climate change as part of your brief? Yeah, I mean, that's part of the risk that we are discussing with banks and we are making a regular supervisor review and evaluation process of banks risk and risk management systems. I would say that so far we haven't really seen that banks have developed, I mean, the risk identification system in this area yet. I mean, this is a very difficult area. There is a lot of discussions everywhere and we are discussing as well internally. But I think here we have all to step up our efforts in order to identify the risk and also to make sure that we can measure and monitor the risk in this area. But it is difficult. I mean, I'm the first to say that, but it is on the agenda and on our radar screen. Yeah, OK, fine. In a couple of minutes I'm going to come to the audience because I suspect you may have questions for my panellists. But before I do, I've got to be slightly provocative, Somia, and bring up the vexed question of Iqbal Khan. For those of you in the audience who don't know this story, it was a slightly tragicomic tale of a former senior Credit Suisse banker who fell out with the chief executive, left the bank and then was tailed by private detectives and led to a confrontation in the centre of Zurich. It was great fodder for journalists and we had great fun writing about it. But the serious point and why I'm bringing it up... Which may I interject, that raises the question of responsible media, but I don't think you're on the hot seat on that one. You might be outnumbered given the number of journalists in this room, but that is an important question, absolutely. But the reason I raise it here is because it does come down to culture and questions of culture and behaviour and so on. What we were talking about earlier, in terms of the tone from the top being important in defining culture and the way people think about behaviour, given that the chief operating officer left the bank as a result of this having apparently been involved in authorising the tailing. How do you square that with the importance of sending positive messages to staff? I cannot really comment on this specific incident. I think just in general I would say it's a very interesting case study. Harvard Business School once did a case study on UBS. I remember when I was at UBS and they picked obviously different incidents, but it's an interesting case study on governance. In general I would say just a couple of more broad themes I would say. First of all, it's interesting what practices companies may engage in, but which are never out there in the public domain. So if there are valid predicates to surveilling, for example, right? So if let's say you have a contract with someone which ensures that they're not supposed to do X, Y, Z, and you think that they may be breaching that, it may be that you hire some firm to surveilling, or for example, due diligence, banks are under tremendous amount of scrutiny. So do companies or financial institutions hire surveillance firms for prospects that they're about to hire? Let's say you're about to hire someone of very senior role at a bank and you need to know. There were rumors, let's say, in the press about this person and you don't know if the person has been engaging in misconduct or not or goes to weird places. Do you hire a firm to surveil them? These are interesting questions. I think if anything, and as I said, I will not address the media question, which I have my own questions about, I'm sure many of you do, even in the media. You can ask that. But what it does is it raises, I think it's always, these examples are unfortunate, but they're very good examples because it raises to the debate. You could even say it's an ethical, in some cases, ethical dimensions, right? And then it also tests the governance of an organization, right? And this is not something that's unique, right? I mean, there have been many crises, organizational crises, if you will, and I wouldn't call this a crisis. But in other context, which the board has had to step in and address because management is somehow conflicted. But I would say this is a test of whether it works. And I know I'm not really answering the question because I can't comment about the precise incident. But what I would say about the media, and maybe if you will, what I find interesting is the repetitive nature of non-checked underlying source material, but just a regurgitation of whatever is in, originated in the tabloid press, yellow press or whatever you call it. So that to me is a departure from what I think the responsibility of media is to society, right? I mean, there was this outrage about fake news and all of this. But it's also the responsibility of all of the media to make sure that they source check and they actually report on things that they themselves think are worthy of reporting on. That's an important message. I hardly agree. Let's get some questions from the audience. We can be about anything ethic stretches across a broad spectrum of topics as I've tried to reflect in the questions. Do you raise your hand if you have a question now? Anybody? Yep, just here. Hi, my name is Andres Williams from the ESM. I had a question just on how can we strike the right balance. We're talking a lot about risks in banking. They have an important role in giving credit, deposit taking. How do we make sure that we don't stray too far on not giving service in order to decrease risk and make sure that banks are providing the right risk to the communities? Yeah, Kaston, do you want to take that first? Yeah, I think that was a good question because I really want to say that there is no balance to be struck here because I think you have to make sure that there is good governance in an institution and strong governance, strong values, sound ethics and sustainable profits. They are not by any measure mutually exclusive, but they are mutually reinforcing. I was not part setting the headline for our seminar, but I think that's important to say that you cannot strike a balance here between ethics and governance. When you mean you say you can't, it has to be... Yeah, I think you have to make sure that if you cannot diminish the governance or the request on governance in order to be more ethical or the other way around. Clearly you can never eliminate risk, but it is about doing as much as you can, I suppose. How do you think about it? Yeah, I think you have different categories as I see it. Clearly things that are not legal, we can clearly draw a black and white line, it's not gray. A lot of lawyers, and I'm a lawyer myself, try to say there's a lot of gray. I think there's much more black and white than we actually will admit to. Clearly there are boundaries that we should not actually cross. But then once you get into the is it legal or not, the question is also the fiduciary responsibility that you have. Should you disclose even if you're not required to, right? For example, with retrocessions for example, the fees that fund-to-fund managers were getting, there wasn't a requirement to disclose, so banks didn't do it. Now, should someone have said, you know what, we should actually, out of our fiduciary responsibility, disclose what we earn? Why is it that we're not more on the forefront of that thinking? There I think we really need to work collectively with the regulators and policy makers, but I think there's a lot more that can be done. Yeah, because no one wants to go first. No one wants to be upfront about something that nobody else is being upfront about. So you need regulators to step in. So there's always going to be a risk taking and obviously it's also how you essentially make your revenues. Right? But I think it's the way of you managing and mitigating your risks, the transparency within the firm and also to the stakeholders, as you mentioned, of which there are many, as to how you're addressing risks. Okay. Other questions? Anybody? Yep. The boss has a question. There's a microphone just coming. My question is about sanctions. I mean, how relevant are sanctions? I mean, you mentioned at the beginning, you know, how many sanctions were levied in these years. How important they are in the behaviour of banks? Because when I see, for instance, in Europe we have a very different national, let's say system for sanctioning, misconduct, money laundering, terrorist financing and the like. And sometimes you see that the market reactions when there is a European authority investigating is very muted. Then you have rumours that the US is investigating the same bank and then you see immediate impact on stock prices, CDSs and the like. So is sanction an important component of the solution or is it wrong to rely on sanctions to treat these issues? No, it's an excellent question. I think, you know, I analogize it. Maybe I'll start off by analogizing it too. I used to teach law at one point in my career and I used to ask the question because there are different theories about penalties that you associate with crimes. So deterrent effect, right? So does capital punishment actually deter murders from taking place, horrific murders that weren't then the capital punishment? This is not a direct analogy in some ways, but it's... Maybe that's the ultimate question. But it is the question about what motivates people to do what they do. With sanctions, and in fact I asked the head of enforcement at FINMA at the Swiss regulator, why is it that they don't believe in huge monetary sanctions? That's really something that the US, and when I started in the government I was at the OCC and I worked on one of our cases that I was extremely proud of. I was in the enforcement division and our largest fine was 70 million, it was close to 80 million. Now you just have to add a B instead of an M, right? And even that's even small. And then you ask the question of where does all the money go, which is a separate question, because I don't see improved roads or infrastructure in the US at a different point. But what is interesting is I don't know if it actually deters. So you look at the ratcheting of fines and as you rightly said US starts off. As soon as the US gets involved and US's view of jurisdiction as we know is everything under the sun, it's very extraterritorial. As soon as they get involved and the Europeans think oh my gosh I now I have to get involved and you look at the ratcheting up of fines. There's been so much talk amongst the industry and the US regulators because there's so many of them to come up with a joint settlement. So it shouldn't be the state bank authorities, it shouldn't be the federal bank authorities that are adding on their pound of flesh. They should work together and we've encouraged this broadly of not only US regulators but also European and Asia regulators. For the same conduct if you see FX Libor it shouldn't be just a ratcheting up, it should be collectively for them to work together to come up with a fine. But I'm pretty cynical when it comes to does that actually change behavior? Does it affect how banks and individuals actually engage in misconduct? And it goes back to the incentivization thing. If you look at the Quaco-Ediboli case, it's an interesting case in many respects. And I had heard once that he had stolen some device for an Apple store and his boss found out about at the time and they just laughed it off and said oh this is not an issue. Those are kind of precursors of what is a person willing to do but it's also the incentivization structure. It's the fear of not being able to speak up as to what the problems are and what the issues are. And I think after the fact I think we have to invest much more at the drivers of conduct rather than after the fact punishment because I just don't think it really effectively works. Do you have a comment on that or will you take your cue from the boss? We can take more questions. Any final question? We've got time for one more I think. Yeah, this lady over here. Hi, thanks to the panelists. I'm Carolyn, I'm from the Bowser Committee. My question is for Samaya. Regulation exists in large part. We talk about financial stability, obviously a key objective. Another one is to protect the depositors and creditors of banks. It's a key reason why you're regulated. You have this privileged position of being able to take insured deposits and lend them out in multiple, so leverage. I'm wondering how you think at Credit Suisse about accountability. I was really interested in your characterization of how banks need to think differently about their accountability. Is there any discussion about accountability to depositors and creditors in comparison to shareholders and how that can create some conflict and perhaps affect ethics, decisions, incentives? Great question. Thanks for the question. I think that's something that we alluded to earlier. It's sort of an inherent conflict to drive for your investors and your shareholders maximum amount of profits, but at the same time to protect depositors. In the case of investment banks that let's say do not have retail deposits that are insured by the federal government, it's still a question of the moral hazard problem in general. The bailouts that, of course, governments did with large financial institutions. I think banks and not only Credit Suisse, but a lot of banks actively discuss how to manage both at the same time, obviously, maximizing profits. I think it goes into the same discussion of making sure that we are complying with rules and regulations and that we abide by ethical practices and our business conduct. So it goes back to like, is the code of conduct that all the banks have now, is that really lived up to, right? So we have actually, in the code of conduct, we have like the interests of the shareholders, right? The interest of the stakeholders, the interest of the customers, which also include the depositors. And then we really actively, and I've seen that a number of forums debate, is this in the interest of those various constituents? And I think, once again, it's building up and maintaining credibility and trust. I think all banks, there's probably not a single bank that has missed or been free of a scandal or some type of misconduct case. But I do think that once, the other thing I'd like to encourage is that we learn from best practices. I think the regulators sometimes are reticent for understandable reasons. I mean, certainly FINMA, because there's only two large banks to share what best practices are. I would really encourage the regulatory community to do so, right? So be it in the area of developing technology, and if you see things that actually work, or what you were saying about climate change in that, we still don't yet see, you know, risk, effective, you know, identification, risk identification. Programs to address climate change sustainability. I think if, you know, anonymising obviously the institution, but I do think that regulators can help play a role to see how and to your question, how do institutions effectively balance these varying interests? I like the idea of anonymising institutions when there's two of them in Switzerland, but would you agree that this is a good way forward? Yeah, absolutely. I mean, and we have a broad agreement within the Basel Committee with that is a global committee. So, I mean, many of the topics that we have now alluded to here are on the table and discussed regularly, and there are also working groups in different areas. Well, we are nearly out of time. I just wondered if I might be able to put one last question to the pair of you. Just coming back to the big picture, I suppose, of the way in which banks behave and how differently, how cleaned up they have been since the financial crisis, and just to ask again a provocative question, I suppose, but if you think of the many pressures on bank profitability that there are today, not least for ultra low rates, the higher compliance costs that we've talked about, but to what extent were profits pre-crisis, those super, super high profits in many cases, the result of unethical behaviour? Because we've had, you know, lot of the scandals have been as a result of discovering things that were inflating profits, misselling of products, scamming the system by manipulate and libor, all of these things. To what extent should we be accepting that the fact that profits are low now is a result of the fact that the sector is not cheating so much, or maybe not at all, I don't know. Yeah, I mean, if you go back to the financial crisis, it was very much excessive risk taking at the time. So, and then we have had individual scandals, if I can say so, but I mean, it's fair also to say that it's not all banks who have, I mean, we have seen scandals in, there have been quite many banks who have recovered and they have improved also when it comes to the governance issues. When it comes to the profits in the European banking sector, I mean, I can compare it with the Swedish banks, for example, and they are doing much more, so they are also in a very low interest environment. They are under the same requirement as the European banks more or less. I think there is, I mean, and we as supervisors have a dialogue with the banks. There is probably some over banking here in Europe, so there is a need for restructuring of the banking sector, but there is also some banks have still rather high costs, so there is a cost to income issue, which they also have to work upon. Then, of course, I mean, it's been taken some time to reduce the MPLs, but we are on our way now, but that has been a cost, of course, for many banks in many countries, but that is an investment for the future. I mean, in order to make sure that we will have a banking system here that can support the real economy, I think that is what we really want to reach. And, Somia, finally to put the similar question to you in a slightly different way. When you're thinking about controlling things within Credit Suisse, if you see a very profitable bit of the business, do your antenna go up and do you think, hang on, is someone cheating here? That's not my first assumption. I think it's a question of, I mean, there are many factors that you would look at, right? I mean, one NDB was a case where you looked at the fees that Goldman received, and it was so out of proportion, right, to analogous fees that other institutions had received for very similar activity. But nobody seemed to raise a red flag. And no one, yeah, that's another thing, right, so it's the escalation and transparency. So that clearly, I mean, there are outliers, right, which would clearly raise red flags, I think, so that's something. But when you talk about going to your first question about profitability, profitability is also a product of cost. Clearly, as we've discussed, banks, if you look at the amount of spend on compliance, this is a good thing, right? The amount of spend in not only in terms of resources but infrastructure and data analytics and everything. So in order to hopefully not repeat the problems of the past but also to hopefully also with artificial intelligence and other mechanisms, be able to, and behavioral indicators, be able to look into the future and try to prevent problems from materializing, financial institutions are spending a lot to address that, and that's also obviously affecting profitability, as well as, which you talked about earlier, the plethora of regulatory change. Yeah, but hopefully it will come good in the end. Let's hope for that. Please, everyone, we're out of time, but do join me in thanking my panel.