Culture in financial services became a key regulatory and political issue following the financial crisis with regulators exploring new approaches around interpreting conduct, but this could create some unintended consequences.
There has been a shift in the Financial Conduct Authority’s (FCA) approach. Where a few years ago “tone from the top” was the main focus, more recently their focus has shifted to embrace new areas and disciplines. The increase in the number of FCA enforcement investigations opened in the last year on governance and accountability grounds tells us that it remains highly topical and looks set to stay.
The FCA has started to use the phrase “the science of culture change” and is asking questions about things that, five years ago, would not have been thought of as regulatory priority areas – or even as anything to do with financial regulation at all (such as diversity and inclusion, and “non-financial misconduct”).
The FCA’s current message to firms on culture is: “We cannot specify the culture a firm should have, but what we can do is help firms to identify what is a healthy culture, and how to get there.” In developing its regulatory agenda, the FCA is increasingly involving experts from disciplines other than regulation. ….
Continue reading the full article here. First published May 7, 2019 by FT Global Risk Regulator.