Mr. Gerry Cross:

There are several very important and interrelated issues in that question. The Deputy started by considering cyclicality of regulation. That is a really important point. It is our job as regulators to look through that cycle because it is well shown. If one looks back, one can see a pattern of post-crisis tightening, then times get good again, and just when there is a need for regulation in good times to be firm, it can be weakened because people think we are in the good times and it is bit different now to how it was before and that we can relax a little. We have a responsibility as regulators and, if I may say so, as legislators, to look through that cycle and to remember what happened in the past. That said, it is really important that we keep proportionality and predictability and the overall purpose we are trying to achieve, which is a well functioning economy and the economic well-being of those whom the financial sector is there to support, that is, consumers and users. It is about getting this right; it is not about making it so rigorous that things cannot happen or so weak that bad things arise. It is about getting it right and it is really important that we do so. I refer to the marketplace and competition within the marketplace. I was asked by Deputy Doherty about Stripe as an example of a tech firm. It is really important that the financial system is able to benefit from technological development and competition from tech firms. It is important that we get these things right and that we do not regulate in a way that unduly dampens that kind of innovation activity while looking through the cycle and seeing what are the risks that we need to guard against. It is very important to consider that in the context of this particular regulation. For example, the regulatory impact statement that accompanies the general scheme is very helpful in calling out some of the aspects that need to be balanced and have been balanced in arriving at the general scheme.

On the issue of vexatious behaviours, it is right to say that we need to be aware of that risk. The UK has also called out the risk of juniorfication of roles that I was asked about earlier by Deputy Jim O'Callaghan. However, the system is designed in such a way that it is about substance and what are reasonable actions and us ultimately standing back and asking what is the culture of the firm in question and what is happening in it. The type of behaviour described by Deputy Tóibín is the exact type of behaviour that would set off alarm bells for us and cause us to say that what is happening in the firm is not good governance or good culture but, rather, box ticking and formalisation of things, which is precisely what this regime is designed to avoid. Although there are aspects on which we must keep a very close eye, the framework is designed to avoid that.

We have closely considered the issue of non-executive directors. I come back to the very important issue of the proportionality of the regime.

It is designed not to impose new obligations on people per sebut to set out for those in a given role the obligations attached to it. With a non-executive director, those obligations are really important, but they are not executive functions. Non-executive directors are not responsible for the running of the firm at executive level. It is a matter of determining whether, within the constraints concerning the responsibility of a non-executive director, she or he takes reasonable steps necessary regarding implementation. On the matter of whether she or he should be accountable for that, these are really important roles.

It is absolutely right to say we have to be very alive to the question of whether we are getting this right but, in our engagement with the Department and on the scheme, we believe we have struck a good balance in respect of the differing aspects.