# Authorities Should Offer Banks a ‘Safe Harbour’

1 Opinion August 11, 2014 Financial News ![Roy C. Smith](/sites/default/files/styles/246w/public/assets/images/uat_025572.jpg?itok=Kn4Ckx0s) By Roy C. Smith > The considerable discretionary power of the US Department of Justice and the Federal Reserve to punish ethical transgressions is certainly an important game changer for the banking industry.

The Federal Reserve Bank of New York said recently it would hold a “workshop on bank ethics and culture” in the autumn. It is stepping up pressure on banks to exercise better leadership to prevent abusive conduct, which still seems prevalent in some institutions long after the lessons of 2008 should have been absorbed.

Rigging of Libor and foreign exchange markets, allegations of efforts to aid clients to evade US taxes and conflicts of interest and inadequate disclosure related to dark pools operated by banks are among recent events to upset regulators.

The NY Fed is suggesting that its annual stress test evaluations of big banks will include queries into their ethical and cultural fitness. If the threat of additional multibillion-dollar lawsuits hasn’t been enough to get the attention of bank chief executives, possibly failing a stress test should.

Read full article as published in [Financial News](http://www.efinancialnews.com/story/2014-08-11/regulators-banks-ethics-culture-lawsuts)

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*Roy C. Smith is the Kenneth G. Langone Professor of Entrepreneurship and Finance and a Professor of Management Practice.*
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