Baker, senior vice president and chief legal officer, added that efforts to drive innovation also include collaboration with external experts. For example, she helped organize a summit with bank managers, 40 external law firms and an expert panel on innovation in law firms – an effort highlighted by Corporate Counsel in the matter. [8] The three lines of defence were created by the BRITISH accounting profession and aim to strengthen the role and independence of internal auditors. Shortly after the financial crisis, it was adopted by UK supervisors and enthusiastically adopted by internal auditors, risk management and others outside the legal profession, who naturally tried to improve the reputation and professionalism of their skills. The current situation of mutual mistrust, the reduction of the internal legal function, the silence of the organized Bar Association and the lack of training of supervisors in the legal framework, as well as the lack of understanding of the basic principles of risk management by lawyers, must cease. It is time to conclude a peace treaty. This means more cross-training, more conversations to understand other professional silos, and more collaboration within the organization, not less. The time has come to do so, as the next step is to extend the basic legal interpretation through algorithms. If we don`t do it right in the human brain, how will algorithms know and who will train them? We need to turn things around now.
The current path is dangerous for the ability of banking organisations to receive effective advice and guidance at a time when the legal framework is becoming increasingly complex. The path is also unwise for the bank branches themselves, where the balance between safety and soundness and prudential regulation, on the one hand, and the rule of law, on the other, has gone wrong. A generation of supervisors has been wrongly educated to believe that safety and soundness go beyond the legal framework and that they have the ability to act within their “inherent power” without restricting their individual discretion. Sometimes senior inspectors would tell audit staff that they had operational problems. Lawyers know that no authority in the federal government has a power that is not conferred on it by enabling legislation; Security and soundness themselves result from a law and are part of the law, not outside of it. In our constitutional separation of powers, there is no federal authority with “inherent powers.” The fault here lies not with the auditors, but with an almost negligent lack of training of examiners by the heads of representation and the senior supervisory and legal staff. A first starting point is rule of law training, which does not consist in imposing judicial-type hearings on every supervisory decision. It is about making it clear that we are governed by a public set of rules that apply equally to everyone in a process that is fully transparent and therefore accountable to the public, and not according to ad hoc standards that can be determined by individual discretion behind closed doors without transparency or accountability to the public. Citing the rules published and practiced by the SEC, and even worse, the aggressive push of ots against Kaye Scholer in the early 1990s, many lawyers believe it is better that Bundesbank regulators do not seek to directly regulate legal services, as they do with risk and compliance.
[41] It is also true that lawyers, at least in the United States, are directly regulated by the requirements of state attorneys with binding ethical obligations and do not require additional regulatory overlay from the federal government. There is a naivety in this belief, and lawyers, including the organized bar association, must be aware that continuing to ignore growing regulatory trends is hurting rather than helping them. [42] When in-house counsel are not defined, they are defined by other members of the organization who have a vested interest in pushing back the contradictory lines that “lawyers are nothing special” or that lawyers are limited to advocacy. In reality, the exercise of legal judgment is something special, and lawyers are not limited to pleading. However, the argument that lawyers are “special” may be taken too far. It is crucial to remedy this situation now, before the transformative changes of the digital age, because if we continue on the current path, there is a risk that the tools of the digital age will not be properly programmed or trained with the integrated legal framework, or do not take into account the professional ethics applicable to the legal profession. We risk coding the errors and prejudices of the present in a more digital future. There is a cultural problem of professional silos that has led to mistrust and misunderstandings, as one silo is skeptical about the work of the other silo.
Distrust begins in the supervisory staff of bank branches. The Federal Reserve and the OCC have long been understood as economist-dominated organizations with relatively small legal staff. In contrast, the Department of Justice and the Department of Justice have long been understood as organizations dominated by lawyers. [19] In some banking organizations, supervisors have long considered that their own legal departments should not be involved in political decisions. Some argued that the Agency`s legal service works for supervisory staff. Until recently, there was also a practice in some bank branches whereby guides and surveillance letters are published without the agency`s lawyers commenting on them before they are published. This lack of lawyers in bank branches and the relative lack of authority and independence of some legal departments is an attitude that former inspectors adopt with them in the private sector when they hold jobs in the areas of risk, compliance and audit, as well as in consulting. Bank branch supervisory staff are suspicious and dislike lawyers and the in-house legal function, whether in a banking organization or within their own branch. With the increasing complexity and intensity of the legal framework, the transition to legal audit compliance, and the next wave of digital transformation, a reset is needed. Many of the concerns of banking supervisors are mitigated by the strengthening, not the weakening, of the internal legal department of the banking organization and the branch. First, you usually need to gain at least five years of legal experience, Cudjoe says.
“We want our candidates to receive a good education because, unlike a company, we don`t have the model to closely monitor their work after they are hired.” Second, for a place like a bank, BMO is particularly interested in lawyers who have gained experience working with financial institutions and regulators. And finally, she says, you need a good reputation to be customer-centric. The Business Intelligence Group provides research and due diligence services with a focus on legal, regulatory, financial and reputational risks to the company`s business and committees worldwide. “The current path is dangerous for the ability of banking organizations to receive effective legal advice at a time when the legal framework is increasingly complex.