United Kingdom (and EU regulation)

Culture in financial services – a regulator’s perspective

The PRA has published a speech given by Andrew Bailey (CEO, PRA) entitled Culture in financial services – a regulator’s perspective.

Key points in Mr Bailey’s speech include:

the culture of firms and the people that make them up is of the utmost importance to financial regulators;
culture is a product of a wide range of contributory factors: (i) the stance and effectiveness of management and governance; (ii) the structure of remuneration and the incentives it creates; (iii) the quality and effectiveness of risk management; and (iv) the willingness of people throughout the organisation to enthusiastically adopt and adhere to the tone from the top;
there has not been a major prudential or conduct failing in a firm that did not have among its root causes a failure of culture as manifested in governance, remuneration, risk management or tone from the top; and
regulators are not able to determine the culture of firms. They cannot write a regulatory rule that settles culture. Rather, it is the product of many things, which the regulators can influence, but much more directly which firms themselves can shape.