FCA publishes financial services culture discussion paper
16 March 2017 London
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The Financial Conduct Authority (FCA) has published a discussion paper on transforming culture in financial services, which presents views from academics and industry thought leaders.
The FCA said the paper is intended to “provide a basis for stimulating further debate on transforming culture in the sector” and discusses what a good culture might look like, the role of regulation and regulators, how firms might go beyond incentives and how to change behaviour for the better.
The paper, a series of essays written by people within the financial services industry and a number of academics, addresses four principal themes.
These are managing culture and the role of regulation, the role of reward, capabilities, and environment in driving behaviours, and leading culture change.
Banks featured in the paper include Crédit Suisse, UBS and BNP Paribas. Academic institutions represented include Cambridge University, the Judge Business School and the Cass Business School.
Institutions focussing on managing culture, the role of regulation, include the Federal Reserve Bank of New York, the Dutch National Bank and the Australian Securities and Investments Commission.
Another input comes from the Banking Standards Board and the London School of Economics.
In its introductory survey, the FCA cited Wells Fargo as one example of cross-industry organisations where culture is mooted as the root cause of scandals, crises and liquidations.
It said: “In the financial services market, the Senior Managers and Certification Regime (SM&CR) is a start, providing a minimum standard for firms to adopt and holding leaders to account for their actions. But there is still a way to go. Beyond rules and standards, what more can be done to improve culture? What does ‘good’ look like?”
The FCA said: “While traditionally, many regulators used economic tools of influence, such as rules and enforcement, we now know more about what motivates behaviour, including cases where economic tools are ineffective or create unintended consequences.”
“Regulators now increasingly recognise that behavioural levers are essential in the measurement and management of culture.”
At this stage, the FCA is not requesting formal feedback, though it has posed further questions to prompt more discussion and consideration by industry practitioners as well as policymakers, boards, regulators, shareholders.
It said: “These questions will also help shape the agenda for our Transforming Culture Conference: ‘Effecting real and sustainable cultural transformations within financial services’, on 19 March 2018.”
Jonathan Davidson, executive director of supervision at FCA, commented: “Culture may not be easily measurable but it is manageable. So firms can and should take responsibility for ensuring their culture is healthy for both their employees and customers, which can complement and support their business strategy.”
He added: “We as a regulator have long gone beyond having the mindset that simply complying with rules is enough. However we don’t believe a one size fits all culture is the right way to go.”
“We want to promote a discussion and consensus on the essential features of a healthy culture and how firms, regulators, employees and customers can help deliver that culture.”
The FCA said the paper is intended to “provide a basis for stimulating further debate on transforming culture in the sector” and discusses what a good culture might look like, the role of regulation and regulators, how firms might go beyond incentives and how to change behaviour for the better.
The paper, a series of essays written by people within the financial services industry and a number of academics, addresses four principal themes.
These are managing culture and the role of regulation, the role of reward, capabilities, and environment in driving behaviours, and leading culture change.
Banks featured in the paper include Crédit Suisse, UBS and BNP Paribas. Academic institutions represented include Cambridge University, the Judge Business School and the Cass Business School.
Institutions focussing on managing culture, the role of regulation, include the Federal Reserve Bank of New York, the Dutch National Bank and the Australian Securities and Investments Commission.
Another input comes from the Banking Standards Board and the London School of Economics.
In its introductory survey, the FCA cited Wells Fargo as one example of cross-industry organisations where culture is mooted as the root cause of scandals, crises and liquidations.
It said: “In the financial services market, the Senior Managers and Certification Regime (SM&CR) is a start, providing a minimum standard for firms to adopt and holding leaders to account for their actions. But there is still a way to go. Beyond rules and standards, what more can be done to improve culture? What does ‘good’ look like?”
The FCA said: “While traditionally, many regulators used economic tools of influence, such as rules and enforcement, we now know more about what motivates behaviour, including cases where economic tools are ineffective or create unintended consequences.”
“Regulators now increasingly recognise that behavioural levers are essential in the measurement and management of culture.”
At this stage, the FCA is not requesting formal feedback, though it has posed further questions to prompt more discussion and consideration by industry practitioners as well as policymakers, boards, regulators, shareholders.
It said: “These questions will also help shape the agenda for our Transforming Culture Conference: ‘Effecting real and sustainable cultural transformations within financial services’, on 19 March 2018.”
Jonathan Davidson, executive director of supervision at FCA, commented: “Culture may not be easily measurable but it is manageable. So firms can and should take responsibility for ensuring their culture is healthy for both their employees and customers, which can complement and support their business strategy.”
He added: “We as a regulator have long gone beyond having the mindset that simply complying with rules is enough. However we don’t believe a one size fits all culture is the right way to go.”
“We want to promote a discussion and consensus on the essential features of a healthy culture and how firms, regulators, employees and customers can help deliver that culture.”
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