The FCA has published its response to a request made under the Freedom of Information Act 2000 (FOIA) for information about its decision to cease a thematic review relating to culture in banks.

The FCA mentions that there are a number of reasons why it decided not to proceed with its thematic review including that the Banking Standards Board (BSB) was carrying out work focussing on similar issues. The FCA also states that its work has ensured that culture is firmly on the agenda in the boardrooms of financial services companies. In particular it notes that:

  • many firms have already commenced significant work to improve their culture. The FCA remains committed to ensuring that customers are treated fairly and put at the centre of firms’ business models;
  • the senior managers’ and certification regime is based on the understanding that the banking sector needs to change and that a culture of personal responsibility has to be embedded in firms. The FCA envisages a shift to a culture where senior managers at firms are genuinely accountable for the conduct of the business. A culture of responsibility should permeate the business at all levels, so that everyone is personally responsible for how they do their job and the decisions they make that affect customers and markets;
  • that it has changed the Remuneration Code to encourage more effective risk management and to better align individual decision making with good standards of conduct for dual-regulated firms. Key changes include introducing longer deferral periods, so that senior managers must apply deferral periods of at least seven years to variable remuneration rewards and all other material risk takers must apply deferral periods of at least three to five years. The FCA has also published guidance on performance management that looks at the undue pressures that may be placed on front line staff through performance management and the mis-selling risks this can create. Once embedded the FCA feels that these changes should go a long way to addressing some of the root causes of the failures that have been seen.

In terms of next steps, the FCA states that it will continue to support and drive culture change in the most effective way by:

  • focusing on engagement with individual firms throughout supervision;
  • using its position as the conduct regulator to promote constructive discussions with various stakeholders including industry and consumer groups;
  • offering support to the increasing number of initiatives outside the FCA on banking culture, such as the work being done by the G30 and by the BSB; and
  • continuing to demand high standards of conduct, backed by supervisions and enforcement action if necessary, such that an appropriate culture remains a top priority for banks’ management.

View FCA responds to FOIA on decision to cease work on banking culture thematic review, 11 January 2016

View  Annex on culture in banking, 11 January 2016