On 12 March 2018, the FCA published Discussion Paper 18/2: Transforming Culture in Financial Services (DP18/2).
DP18/2 is a set of essays that discuss what a good culture in a firm might look like, the role of regulation and regulators, how firms might go beyond incentives, and how to change behaviour for the better. The essays have been grouped under four key themes:
- is there a ‘right’ culture?
- the role of regulation;
- the role of rewards, capabilities, and environment in driving behaviours; and
- leading culture change.
Culture in financial services is widely accepted as a key root cause of the major conduct failings that have occurred within the industry in recent history, causing harm to both consumers and markets. Given its impact and the role it plays in re-building trust in financial services, firms’ culture is a priority for the FCA. The FCA expects firms to foster cultures which support the spirit of regulation in preventing harm to consumers and markets. But changing culture can be hard. Some still see changing culture as a ‘soft’ discipline; and clarifying how to define, measure and manage it in practical terms is difficult. Its intangible nature has left business leaders pondering how to influence and transform culture. The intention of DP18/2 is to gather views from industry leaders, academics, and practitioners as a basis for debate on how to drive sustainable culture change.
The essayists agree that there is no one culture for firms to aspire to. However, they believe that healthy cultures have some specific characteristics that reduce harm. These are explored further through the essay collection. In terms of how industry can drive forward healthy culture change, the FCA recognises that a firm’s leadership plays a significant role in changing culture. However, the essayists argue that focusing solely on the ‘tone from the top’ can overlook the complexity of a topic like culture.