The home secretary, Sajid Javid, as he pushes the idea that senior executives at technology firms should be held personally responsible for distributing harmful material, has clearly been reading up on banking regulation. Page 60 of Monday’s white paper to reform the tech giants applauded the senior manager’s regime in financial services, introduced in 2016 as a response to the 2008 crash, as having “driven a culture change in risk management in the sector”. Javid wants to create something similar for Facebook, Google, et al.
He’s right that there are parallels between tech and banking. Everyone was to blame, so no one was to blame, was the unsatisfactory gist of the official postmortem on Royal Bank of Scotland, for example. There is an echo in the tech firm bosses’ tiresome bleats that they’re doing their best but can’t be everywhere.
The senior manager’s regime was designed to address the problem in financial services. Thus bank executives now have to sign an agreed description of their job every year so there can be no doubt, when the regulator calls, about who was responsible for what. Andrew Tyrie, the former Treasury select committee chair who was one of the chief proponents of reform, put it well at the time: “A buck that does not stop with an individual often stops nowhere.”
Therein lies the appeal for Javid. But let us hope he understands the size of the task. Between 3,000 and 4,000 people are on the Financial Conduct Authority’s register at any given time, with places in the chain of command closely defined. Most of the senior individuals will be interviewed in person before they are approved. It is not a small undertaking.
The tech giants might offer even greater regulatory challenges, and not just because they are mostly foreign-owned. The business model and the products evolve rapidly whereas the principles of risk-management at a bank are fairly static. More to the point, the FCA and the Bank of England were merely hardening an established, if inadequate, oversight system. Ofcom, or a new regulatory body, would be starting from scratch with the tech firms, which adds another order of difficulty.
Javid’s white paper, therefore, did the easy bit. It advanced the principle that somebody should be held to account when terrorist, child-abuse or self-harm material pollutes the internet or social media sites. One can applaud that thinking.
But, as we saw the banks, if the door is left even slightly ajar, individual responsibility escapes at the first sign of trouble. That is the regulatory challenge. It is the mechanics of the government’s intended reforms that will matter and, so far, there is only a sketch.
Mike Ashley took the wrong bet – each way
Mike Ashley never gives up, so it is possible there is time for more developments in his fanatical pursuit of Debenhams. But, as things stood on Monday, it looks as if the Sports Direct founder has encountered an immovable object in the form of Debs’ lenders. The banks want the department store group to enter a pre-pack administration and, since they hold the power, they can set the script.
Minority investors in Sports Direct may breathe a sigh of relief. Ashley has spent £150m from their collective funds on the Debs adventure, and Sports Direct has ended up with a 29% stake in a company whose equity will soon be worthless. The whole expedition has been a waste of time and resources.
If the ambition was to have a strong negotiating position in the final showdown, the mistake has been obvious for a while: Ashley should have bought parcels of Debs’ debt rather than concentrate solely on the equity. He made a bad bet in getting involved in the first place; then he bet on the wrong financial instrument.
Losing at Debs, one suspects, will only fuel his appetite for more gambles dressed up as “strategic” investments. But his overall record has been terrible, and is not helping Sports Direct’s share price. Ashley should stick to the day job. He won’t.