The Banking Standards Board (BSB) released its first annual report on 8 March, which focuses on banking culture. Key elements of the 28-page report emphasise the concept of culture of a firm and how that should be considered within the specific aims of a firm. These include purpose, compliance, conduct risk, leadership, remuneration, speaking up, training and customer outcomes.
Now, if you remember the Financial Conduct Authority (FCA) recently dropped its intended Thematic Review on banking culture stating as its reason ‘during the course of this engagement, we became aware that the Banking Standards Board had begun a piece of work focussing on similar issues and we were therefore conscious that we did not wish to duplicate that work.’
Cynics would argue that the FCA has considerable powers of enforcement, sanctions and even the power to revoke banking licences. If the thematic review had been completed by the FCA, it may have found some serious misgivings concerning the banking industry and culture and as a result, the FCA would be compelled to use those considerable powers more aggressively.
The introduction of the Senior Managers and Certification Regime has certainly made headlines around bankers fearing the worst. For example, the Financial Times reported: ‘Bankers “terrified” at new regulations, senior executives fret over the implementation of senior manager regime’.
On the other hand we have also seen there has been pressure for the FCA to soften its approach in the City. So, handing back the almost impossible task of addressing banking culture or, in fact, corporate culture, to the Banking Standards Board could be seen a convenient way to ‘pass the monkey’.
If we look back just a few days, here is a round-up of current action being pursued by the regulators. On 9 March 2016, UBS and Deutsche Bank were required to pay back £50 million to HM Revenue and Customs because they lost a legal challenge regarding offshore structures that operated in 2003 and 2004, to avoid paying tax on bankers’ bonuses.
A week before, on 2 March, the FCA banned a former Deutsche Bank trader, Mike Curtler, who pleaded guilty in the US to LIBOR rigging. On 28 February, it was reported that JP Morgan Chase had sacked two traders, Andrew Lombara, head of US Treasury trading and a junior Treasury trader, Chi Lee, over compliance failings. Just before this, on 26 February, UBS was being investigated by Belgian prosecutors over allegations of money laundering and organised tax fraud at the Swiss bank. And so it continues.
That said, it’s not just the banks. We just need to look at VW, where the head of its US operation has just left in the wake of the emissions scandal, for similarities around the demise of ethical conduct.
One point of interest in the BSB report was the question of whether professional qualifications are required by bankers and the relationship between law, regulation and ethics.
You may be aware the ICA /ICT already do this and many of our customers are banks and corporate entities which are already a long way down in this process. It’s not all bad; there are significant improvements being made across the sector and we are developing new products and services to meet this demand of training and qualifications to meet the ever-increasing demands of regulators. You can see full details of our certificates and diplomas here.
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