Regulating for Non-financial Risk


Room 108, Level 1
Melbourne Law School, 185 Pelham St, Carlton


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Presented by Professor Pamela Hanrahan, University of New South Wales and Professor Iain MacNeil, University of Glasgow

Recently we have observed a shift in the focus of regulation as carried out by financial regulators in the UK and Australia towards an explicit focus on regulating to improve the treatment of non-financial risk (NFR) in financial firms. NFR has been described as encompassing operational risk, compliance risk and conduct risk. This new focus emerged from the financial crisis of 2007-8 and subsequent conduct scandals in wholesale and consumer financial markets.

We observe that, as part of this shift in focus, the regulatory agencies are increasingly intervening ex ante in four elements of financial firms’ governance: purpose, culture, accountability and remuneration. The shift in focus has been accompanied by a growing appetite, on the part of regulators, to intervene in what might be described as the ‘sociological’ attributes of financial institutions. This includes organisational culture and values, and the internal governance and management practices within financial firms that shape and realise them. This shift in focus to regulating for NFR has implications for the design and practice of financial regulation that are yet to be explored.

We aim to clarify the nature of the interventions, the expectations associated with them and their implications for supervision and enforcement from the perspective of regulators and regulated firms.

About the Speakers

Pamela Hanrahan is Professor of Commercial Law and Regulation at the UNSW Business School Sydney. Pamela is a member of the Executive Board of the Business Law Section of the Law Council of Australia, a member of the National Corporate Governance Committee of the Australian Institute of Company Directors, and a non-executive director of Landcom. In 2010-11 she was ASIC’s Regional Commissioner for Queensland and in 2013-15 served as the Registrar of Community Housing for NSW. In 2016-17 Pamela was an appointed member of the ASIC Enforcement Review Taskforce and in 2018 she was an adviser to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Iain MacNeil is the Alexander Stone Professor of Commercial Law and immediate past Head of the School of Law at the University of Glasgow. He is an eminent scholar in the areas of corporate and financial law and regulation. His early career was in the investment banking sector in the City of London. He acted as special adviser to the House of Lords on the EU’s MiFID II regulatory framework for the investment sector and is currently Senior Adviser on an EU DG FISMA project examining implementation of financial sector directives across the EU.