It is time for a bit more realism, thought and perhaps humility in the often circuitous debate over post-crash regulation and reform. Certainly a good start was made in the recent lecture* from Douglas Flint, Group Chairman of global banking heavyweight HSBC. Flint is well-placed to provide this. His father before him was, and still is, a highly influential Scots accountant who, with great charm, took no prisoners when blunt speaking was required. Flint made the point that his father ‘taught generations of accountants in Scotland the difference between a profession and a job, instilling in everyone the responsibility, as well as the privilege, of being in a profession’.

This was his starting point in an argument which stressed human behaviour and downplayed regulatory solutions. Flint’s point was that to bring long-term change, improvement and a change in the public’s perception to the financial sector behaviour had to be at the heart of everything. ‘Capital, liquidity and infrastructure enhancement will also play a role as will better governance and supervision but the greatest opportunity for improvement will come from defining, teaching, reinforcing, rewarding and enforcing values in terms of behaviour’, he said.

But this will always be hard to bring about. ‘If we learn anything from history’, he said, ‘it is that we are destined to repeat mistakes whenever we believe that we have solved definitively the cause of the most recent crisis’. People want solutions which will bring them certainty. Yet certainty is never going to be possible in a complex world. ‘Ever more today, society does not want to acknowledge unpredictability’, he said, ‘particularly around economic outcomes – we want to believe an unwelcome outcome is the cause of failings that need both to be compensated and cause revisions to be made to the system to reinforce predictability and so restore confidence in the future’.

The Eurozone problem, Flint observed, was a good example of this: ‘If only it were as simple as moving a toggle switch between “Austerity” and “Growth”’, he said.

The reasons behind the great financial crisis were, of course, as much human as technical. And that makes it all much harder to accept. It is easier to say someone else was at fault rather than we were all at fault. ‘Simply put’, he suggested, ‘we believed that which was comforting to believe and we believed those in authority whether political, financial or economic when they confirmed that our aspirations were realistic’.

As a result a whole range of unlikely possibilities were seen as easily achievable, such as growth without an improvement in productivity, a step on the housing ladder without the need for a down-payment, house price inflation well beyond wage growth, higher returns without higher risk, and so on. And then post-meltdown and armed with enormous amounts of hindsight, a large number of people announced that they had seen the flaws all the time. ‘The band of those who claim they saw the impending wreck’, he said, ‘grows daily’.

But realistically they did not see it coming, nor were they likely to, and nor could regulation have done much about it. ‘A good parallel’, he suggested, ‘might be that we are very skilled today in understanding the cause of earthquakes, how to calibrate their impact and in building infrastructure and buildings better able to withstand the shocks but we still cannot predict where and how severe the next earthquake will be’.

The important point is to understand the causes, learn the lessons, build barriers to protect us in the future, and restore confidence. And much of that has been done. The question now is to move the argument on. And that means putting more emphasis on human behaviour than on regulation. ‘There is a real need for leadership to call the point at which we have to stop adding to the reform agenda and observe whether the aggregate of all that has been done has been sufficient to change behaviour so that the system in aggregate is fit for a purpose that is universally understood and accepted’, he said.

This is the hardest part. It is much easier to juggle with the creation of regulations than to try to alter behaviours, and being easier people tend to follow that route. Flint devised a simple test to highlight where reformers were putting their efforts. ‘It is worth noting that a simple word search in the Independent Commission on Banking Report mentions capital 463 times, liquidity 140 times and behaviour 7 times’, he reported. ‘In the FSA’s report into the failure of RBS, the numbers are 1389 for capital, 733 for liquidity and 16 for behaviour respectively’.

Yet it is in the field of behaviours where effort should be concentrated. ‘It is the aggregate of behaviour evidenced within the system and in particular how it has changed that will change society’s perception of banks rather than thousands of pages of worthy new regulations designed to work in theory’.

‘So rather than obsess about whether an organisation can break down exposures by the hour, by product, by customer, by industry classification, by business line, by country, by region’, he said, ‘care more about tone from the top, how individuals are screened for behavioural characteristics when recruited or promoted, how ethics and values are taught and reinforced, how values are enforced and rewarded and how an organisation looks for and adapts to changing expectations within the communities it serves’.

In other words make everything rather more professional. And use that word in its original sense.