On January 6, 2020 the Financial Conduct Authority (FCA) published a Dear CEO letter regarding non-financial misconduct in the wholesale general insurance (GI) sector as a result of recent publicised incidents.
Poor culture in financial services can lead directly to harm to consumers, market participants, employees and markets. How a firm handles non-financial misconduct throughout the organisation, including discrimination, harassment, victimisation and bullying, is indicative of a firm’s culture. The FCA view both lack of diversity and inclusion, and non-financial misconduct as obstacles to creating an environment in which it is safe to speak up, the best talent is retained, the best business choices are made and the best risk decisions are taken.
Despite work being undertaken in the market to tackle the issue of non-financial misconduct, it continues to be prevalent and will be a key focus for our supervision of firms and of senior managers.
The FCA expects firms and senior managers to embed healthy cultures by identifying and modifying the key drivers of their culture. As set out in the FCA’s Approach to Supervision, there are four key drivers of culture which can lead to healthy cultures and reduce the potential for harm. These are:
- approach to rewarding and managing people; and
- governance, systems and controls.
The FCA aims to identify and share knowledge that supports transformation of culture and encourage firms to act to make changes towards healthy, sustainable cultures. To access this information visit: https://www.fca.org.uk/firms/culture-and-governance
The FCA expects all firms to review this letter and share it with their senior executive committee and Board. If gaps or shortcomings are identified, they should be addressed. The FCA will continue to work closely with the Prudential Regulation Authority to assess instances where inappropriate culture and behaviour within firms may impact compliance with regulatory expectations, standards and the FCA’s statutory objectives.