FCA publishes paper on transforming culture in financial services

“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,” the paper says. “To increase confidence, firms need to demonstrate they are working in the interests of consumers and the market.”

The industry’s culture is a priority for the FCA given its impact, and the role that it must play in re-building trust in financial services. “We expect firms to foster cultures which support the spirit of regulation in preventing harm to consumers and markets,” the discussion paper says.

However, it also acknowledges that changing culture is easier said than done. “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,” it says.

Although there’s no single culture that firms should try and build, there are characteristics of healthy cultures that can reduce the risk of harm, the paper says.

The role for regulators, it says, includes holding individuals accountable, as well as firms. To that end, the FCA’s ‘accountability regime’ for senior managers, “aims to hold firms’ leadership to account for their own behaviour and for taking reasonable steps to manage the behaviour of those in their areas of responsibility,” the paper says.

“We as a regulator have long gone beyond having the mindset that simply complying with rules is enough,” says Jonathan Davidson, executive director of supervision, at the FCA, in a statement. “However we don’t believe a one size fits all culture is the right way to go. So we want to promote a discussion and consensus on the essential features of a healthy culture and how firms, regulators, employees and customers can help deliver that culture.”