On 4 September 2020, the FCA issued its 2019/20 report covering engagement work for the 5 Conduct Questions Programme. Due to prioritising COVID-19 work, the FCA is publishing the report later than usual.
This latest report reflects the FCA’s widening engagement. It hosted conduct roundtable sessions with 18 wholesale banks, each represented by a group of 10 staff at vice president level, typically reflecting about 10 years of industry experience. Each session included a short, written survey and a longer discussion of organisational, operational, regulatory and personal topics.
Key messages in the report include:
- Conduct and culture change programmes are having a positive effect.
- While awareness of conduct risk is higher, skills to identify these risks must improve. This is especially important in the evolving work from home operating model predominately in use.
- Psychological safety for day-to-day speaking up and challenge still needs attention from staff at all levels.
- Remuneration strategies that focus on the ‘how’ as well as the ‘what’ are a positive development but more can be done to fully harness strategic benefits.
- Corporate purpose and principles have become confused. CEOs and line managers can help clarify how these terms link to individual roles and responsibilities.
The report also mentions that many issues were raised during the conduct roundtable sessions that warranted follow-up. The report notes that some of these are best addressed by staff directly, some by line managers and some by executives. Key points include:
- Have staff had sufficient training to be able to identify conduct risk in their day-to-day roles beyond general awareness?
- Does the firm’s overall framework for identifying and mitigating conduct risk reflect adequate, bottom-up exercises to understand those risks?
- Do staff understand how their own roles and responsibilities can potentially create conduct risk or harm for the customers, the firm or markets?
- Are messages from the top, including corporate purpose and values, translated in a meaningful way to the specific roles and responsibilities, targets and objectives at the individual and unit level across the firm?
- Is enough being done to support line managers in their efforts to enable their teams to perform at their best?