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Should UK stakeholders assert themselves in regulatory conversations?

Some finance directors, when they can be bothered, bitch about the rules. The regulators, in turn, suggest that had FDs had taken part in the process of formulating the rules, those rules might have turned out differently. The FDs retort that they don’t have the time for such inconsequential stuff and complain that said regulator’s outreach programme is feeble in the extreme. And so goes the tit-for-tat world of standard-setting.

Buried under yards of governance verbiage, the website of any regulatory body or standard-setter carries a neat list of comment letters it has received. They tend to be orderly, thoughtful and a credit to everyone involved. The people who take the trouble tend to take considerable trouble. Questions are answered carefully. The issues are analysed. Disputes are tactfully phrased. Reading between the lines is a skill required on both sides. But it is a civilised process and usually ends, if not with radical change, with a greater understanding of the difficulties which come from any effort at standard-setting or regulation.

This does not happen everywhere. The day he quit from his post as chairman of the US standard-setting body the Financial Accounting Standards Board (FASB), Bob Herz received a comment letter prompted by his resignation and relating to the FASB’s somewhat controversial proposals on financial instruments that were out for comment until the end of this September. It came from a Wall Street investment advisory firm.

To call it violently disapproving is something of an understatement. It read: “Dear Mr Herz. You have blood on your hands. If you continue to facilitate financial fraud to the degree you are, the consequences will be premature deaths of a great number of innocent economic participants blind to your insanely arrogant recklessness. It saddens me that you are a member of my species.”

This reminded me that there can be a gulf of difference between the American way of doing business and that of our own sceptred isle. And it is really quite hard to put yourself into the mindset of someone, even on Wall Street, who would write that sort of a letter in a professional capacity. The bitterness and bile overflows. But that writer is not alone. This, again in its entirety, is the letter sent in to the FASB in mid-August from the president of the State Employees’ Credit Union: “Dear Sirs, theoretically arrogant, in practice insane, financially negligent and reckless. Other than that, I have no concerns”.

That one at least is brief and, in its way, quite witty. But it is also, along with many other comment letters in a similar vein, a worrying sign that there appears to be little of what you might call investor outreach and little chance of reaching an agreement that people, while disagreeing, might accept. It reflects the extraordinary emotions the idea of mark-to-market can provoke. But it is also part of an organised campaign by the innocent-sounding American Bankers Association, which has been urging its members to write to the FASB in outrage. They even provide a sample letter, which is actually quite mildly phrased, so that protestors can get their arguments right.

In the UK, where mark-to-market also raises the blood pressure, the opposition is equally argumentative but tends to employ cosy Britishisms such as “daft” rather than indulging in chest-beating character assassination. The difference comes down to two cultural differences. In the US the pejorative term bean-counter is flung about as lawyers and bankers seek to divert criticism of their behaviour by rubbishing the accountants. And, of course, it is the culture stateside that huge amounts of cash that goes into lobbying on behalf of vested interests. Bob Dylan had it about right all those years ago when he sang that “Money doesn’t talk. It swears”.

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