Regulation of the media
275. Our witnesses generally argued that the current
system of media self-regulation was working well in practice.
Lionel Barber noted that his paper required two sources before
publishing stories which would have a major market impact, and
noted his paper's self-restraint in not going to press earlier
despite strong rumours circulating in the market about Northern
Rock's excessive reliance on the wholesale funding market.
Robert Peston talked of the "massive detailed verification
procedure" that the BBC adopted in respect of major financial
news. We asked
Alex Brummer, City Editor of the Daily Mail, if he had
ever refrained from publishing a story in response to pressure
from the regulatory authorities, financial institutions or the
Government. He recalled one occasion in 2007/8 when his newspaper
had come across a document which could have been damaging to the
sales process for Northern Rock and, following requests from "people
at the highest level" the Daily Mail had refrained
Simon Jenkins from the Guardian drew parallels with press
coverage of the Falklands War where the Ministry of Defence had
pointed out the dangerous consequences of some reporting.
276. One suggestion sometimes mooted is that the
financial media could be subject to similar guidance on the sensitivity
of material they might contemplate publishing as applies to other
media in respect of defence stories. These may be influenced by
the DA (Defence Advisory) notice system which has been in place,
in its current form, since 1992.
Funded by the Ministry of Defence, the DA Notices Committee comprises
representatives of Government and the media. DA notices give guidance
to the media on material they should refrain from publishing since
it might threaten the national security. As the Newspaper Society
pointed out to us, the DA notice system is in any case "entirely
Simon Jenkins thought that it was "a good question"
whether an equivalent process of notification could apply to the
However, most of the evidence we received was unequivocally opposed
to such a formal system, believing that it would be the thin end
of the wedge of censorship. News International thought that such
a system might be manipulated by financial institutions to curb
277. Several of the written submissions we received
argued forcefully that any attempt to impose restrictions on financial
journalists would infringe article 10 of the European Convention
of Human Rights. Article 10 reads as follows:
Everyone has the right to freedom of expression.
This right shall include freedom to hold opinions and to receive
and impart information and ideas without interference by public
authority and regardless of frontiers. This article shall not
prevent States from requiring the licensing of broadcasting, television
or cinema enterprises.
The exercise of these freedoms, since it carries
with it duties and responsibilities, may be subject to such formalities,
conditions, restrictions or penalties as are prescribed by law
and are necessary in a democratic society, in the interests of
national security, territorial integrity or public safety, for
the prevention of disorder or crime, for the protection of health
or morals, for the protection of the reputation or the rights
of others, for preventing the disclosure of information received
in confidence, or for maintaining the authority and impartiality
of the judiciary.
278. According to evidence from the Financial
Times, both UK courts and the European Court of Human Rights
have held that reporting restrictions constitute an interference
with the right to freedom of expression. The test of necessity,
according to the European Court, requires a "determination
of whether a restriction was proportionate to the legitimate aim
pursued and whether the reasons given by the national authorities
are relevant and sufficient".
279. Quite apart from the ethical questions arising
from the imposition of restrictions on free reporting during a
financial crisis, many contributors to our inquiry pointed out
the manifold practical problems such a course of action would
entail. Incisive Media, a major financial publisher, suggested
that determining what constituted a banking crisis would be an
impossible task. It wondered who would define a banking crisis,
and what would trigger press restrictions. In its view, which
was shared by other memoranda, the very designation of a state
where reporting restrictions applied would in itself create panic
280. The practical difficulties of imposing any uniform
restraints on the press would be enormous. As many commentators
pointed out to us, 'formal' print journalism and broadcasting
was only one of numerous sources available to interested readers.
The blogosphere was fast emerging as a source of information.
Whereas the traditional media had by and large exercised restraint
and judgment in reporting the current financial crisis no such
inhibitions had concerned many of the informal sources of data.
The blogosphere of its nature was transnational, instantaneous
and operated 24 hours a day. In written evidence, the Guardian
Journalists, broadcasters and publishers have ethical
standards and a duty to act responsibly. It would be impossible
to impose reporting restrictions on the global network of bloggers,
message boards, and internet forums, and these forums are often
the forums for unverified rumours. The distinction between the
unidentified blogger and the professional journalist, is that
the latter's reputation, and the reputation of established media
operations, depends on certain professional standards, including
the verification of rumours.
Lionel Barber felt that the quality of financial
journalism had been compromised by "lowered barriers to entry"
with "the rise of blogs" and "the fact that we
now live in a 24-hour news cycle".
It is also increasingly difficult to distinguish between online
and conventional reporting. For example, Robert Peston maintains
a regular blog on the BBC whilst the Financial Times Alphaville
blog has been the source for a number of key revelations during
the crisis. News International felt that if the financial press
was regulated more severely this would simply serve to "increase
the authority of comparatively unregulated sites, such as financial
bulletin boards and chatrooms, which would be disastrous for the
281. Perhaps the most compelling argument of all
is that the current crisis was partly caused by the opacity and
complexity inherent in the world's major financial institutions.
Whilst those on the inside had privileged access to information,
ordinary consumers were left in the dark. The Guardian
very appositely quoted Jeremy Hillman, editor of the BBC's business
and economics unit:
The public has an absolute right to know about weaknesses
and structural problems at Britain's banks. Why shouldn't the
average person have access to the same information as those in
the know? How many senior bankers invested in Northern Rock in
the months before its nationalisation? Not very many, I expect.
282. In written evidence, the Financial Times
went further in suggesting that the banking crisis had pointed
not to deficiencies in the media's coverage of events but rather
to deficiencies in the sources of information to the media.
The government should
be addressing the degree
of public disclosure required by financial institutionsincluding
banks, private equity firms and hedge funds. We submit that focusing
merely on the role of media as opposed to addressing the overall
sufficiency of disclosure obligations and public access to financial
information misses the larger issue altogether.
Indeed, in their efforts to inform the public the
media often face fierce resistance from some institutions. As
Alex Brummer explained:
Business journalists are in a very unfair competition.
We are individuals working against some of the richest organisations
in the world with some of the most powerful communications experts
working for them.
Jeff Randall described the "huge industry"
dealing with public relations for financial institutions generating
large earnings by distorting the truth. He cited the example of
the Daily Telegraph's coverage of the imminent departure
of Sir Fred Goodwin and Tom McKillop from RBS on 8 October. He
told us that RBS had issued an on-the-record denial of the story
and called on the proprietors of the Daily Telegraph to
issue an apology. Five days later the factual basis of the story
Lionel Barber described how he had a record of "all the libel
suits that have been threatened by well-heeled Russian oligarchs
with City law firms being paid huge amounts of money trying to
intimidate the Financial Times".
evidence does not support the case for any further regulation
of the media in response to the banking crisis. A free and functioning
press is a basic requirement of a democracy. Regulation of the
media in the context of internet publication would be impractical
as well as undesirable. We are not convinced by the need to draw
up a parallel system of 'financial advisory' notifications to
mirror the system applying to defence. The press has generally
acted responsibly when asked to show restraint in particular areas.
Too often, indeed, those responsible for creating the current
crisis have sought refuge in blaming the media for their own conduct.
284. We acknowledge
the sensitivity of much of the material broadcast by the media
during the current crisis. We appreciate the pressures of competition
and of the 24-hour news cycle. These can coarsen financial journalism,
preventing reflection and reducing the space for verification
and balancing material. It is important that editors take a responsible
approach to breaking news and in particular that they verify their
sources with scrupulous care. But it is crucial that the public
are kept informed about institutions holding their money. If the
public is to trust the banks in the future it needs to be confident
it has sufficient information on how they are operating, and that
such information is not restricted to those on the inside. Indeed,
the Government may wish to look carefully about the disclosure
obligations applying to banks and other financial institutions
to see if further transparency would be beneficial.