Editor's note: Huguette Labelle is the chair of Transparency International, a global civil society organization that fights corruption.
(CNN) -- Trust used to be a word associated with banks. But the avalanche of financial scandals, from manipulation of interest rates to mis-selling of financial products, has changed all that.
At a time when so many economies and people's livelihoods have been damaged, we need a strong and transparent financial sector that we can trust, one that is corruption-free. This requires an overhaul not only in the regulatory environment, but also a resetting of moral compasses by those in the industry. Both are possible.
The relaxation of regulations in the past decade has encouraged banks to engage in ever riskier behavior, has hampered oversight of highly complex financial products, and has eroded standards of conduct. The lack of transparency and accountability in the financial sector has allowed people to cheat with impunity.
Industry-friendly regulators failed to detect or prevent the mis-selling of financial products, a root cause of the subprime mortgage debacle. And even when regulators were warned about collusion in fixing a key benchmark rate known as LIBOR, they failed to do their job. LIBOR, short for London InterBank Offered Rate, reflects how much it costs banks to lend to each other and is the guide rate for fixing the amount of interest that will be charged on trillions of dollars' worth of financial products such as mortgages.
Banking regulators must show greater backbone, knowledge and independence now to tackle these problems. They must be armed with the full arsenal of carrots and sticks, fines and even criminal sanctions. Until now, there has not been a single significant high-level prosecution of a senior bank manager as a result of the financial crisis.
Regulators need to remember that their job is to protect individual consumers as well as the financial system as a whole. They need to be independent.
Unfortunately, the financial sector spends more on lobbying than almost any other sector, most of it directed at relaxing regulations. And customers -- relying on less well-funded consumer protection groups -- have limited clout to counter this undue influence on the regulators who are charged with protecting them.
The impact of this clout is further exacerbated by the revolving door between the financial industry and the regulatory bodies. Some argue this brings valuable industry experience to the regulators, but others note it can also create a conflict of interest. Effectively, we have left the fox guarding the henhouse.
Barclays and other banks now face the challenge of changing a culture that has become cavalier as it pursues profits and big bonuses. What we know from our years combating corruption is that people are less likely to cheat if they are reminded that dishonesty is wrong. Simple but true. That is why it is so important that companies have and use their anti-corruption programs to reinforce the message of zero tolerance for corruption, rather than use them as window dressing to conceal wrongdoing.
In the aftermath of this particular scandal, Barclays has pledged to write a new code of conduct applicable across all its operations. It needs to review and revise its policies on lobbying, conflicts of interest and performance-based remuneration. At a minimum, such policies need to ensure that the mechanisms and incentives that caused the LIBOR manipulation are removed and replaced with new incentives that promote integrity and transparency over the long term.
Regulators also now have a window of opportunity, amid all the public outrage, to enhance transparency in the financial sector by doing their jobs with conviction and integrity, stymieing the financial lobbyists and requiring banks to upgrade their internal policies. Finally, they need to vigorously and consistently enforce the rules.
But, sadly, they have to move fast, because once this round of bank self-flagellation fades and the lobbyists get back into action, money will once again speak louder than words.
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The opinions expressed in this commentary are solely those of Huguette Labelle.