In his speech to the Financial Conduct Authority (FCA) conference on “Transforming Culture in Financial Services” on 19 March 2018, Mr Bailey noted that:
- Work on firm culture continues to be an important priority for the FCA: the FCA’s objective is to prevent and pre-empt misconduct, not just clear up the messes when they happen.
- There is no single right way to achieve this: regulatory rules and supervision help to create incentives and provide tools towards improving culture, but good culture will not be achieved solely by regulatory prescription.
The speech reflects the ongoing focus of the FCA on improving conduct and behaviours within firms, and on the use of remuneration regulation and senior manager accountability as tools of conduct management. Mr Bailey referenced the Senior Managers regime and the introduction of remuneration regulation for senior managers - including rules which make remuneration subject to deferral and potential clawback or malus adjustment - as examples of tools which encourage responsibility and accountability. He noted the importance of effective governance and strong management within firms as part of the drive to good culture.
But Mr Bailey emphasised that culture change is not just about stopping bad things - it is also about encouraging and incentivising positive culture. Mr Bailey regards firms (and their owners and managers) as having public interest duties which shape positive responsibilities around culture. The themes considered in the FCA’s discussion paper essays reflect the expectation of ongoing thinking on these points.
In line with the FCA’s recent focus on diversity within its own ranks, Mr Bailey confirmed his view that diversity is an important factor in improving working culture and ensuring that firms are able to effectively understand and represent the public interest. He reiterated his support for transparency and targets as a tool for achieving better diversity.
An elexica summary of the discussion paper FCA DP 18/2: Transforming Culture in Financial Services can be found here.
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