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Blog series – Robin Bailey

In advance of our event at the Bank of England on 21 March 2017, we asked interested parties to write on the theme: Worthy of trust? Law, ethics and culture in banking…

 

From my experience the key to establishing a culture that has integrity and becomes engrained throughout the whole organization starts with the Board displaying a passion and ownership and determination for having a culture respecting the requirements of the Law and Regulation but going beyond that in “doing the right thing” for its employees and customers. It is however significantly reliant on the CEO and the Senior Team relating to that ambition and continually demonstrating those behaviours required in the day to day operations of the Company.

There need be no conflict between a High Performing culture and an embedded ethical approach. I have found that where an ethical culture is encouraged based on clear objectives, clear values, mutual respect and trust for and from the leadership, that business success invariably follows.

Culture is a complex mix of collective and individual attitudes and behaviours and requires a comprehensive oversight. The overlapping moral codes between ingrained principles, social conscience,and strict adherence to rules all need to be recognised. Strong negative contributors can have an undue influence on individuals and localized teams particularly when this is allied to positional power. Sub cultures can easily arise as a result.

Having a set of key Corporate values and operative beliefs that everyone in the organization can recognize and expect others to work to will restrict the opportunity for this to occur but there is still a need for reinforcement through visible leadership and formal and informal policies and intervention is required when dissonance is evident.

To avoid rupture of the culture during periods of Company stress the purpose and strategy need aligning to the expected Corporate behaviours from the outset as its easy to de-prioritise it when financial underperformance dictates more urgent issues to address. Equally when performance is good attention to maintaining a focus on cultural coherence and identity may be deemed a low priority as it might be seen as a “soft” attribute.

To keep momentum Board and Senior Management need access to a wide variety of measures and actions both internal and external and these should to be integrated into formal Board reports. This will enable the Board to spot inconsistencies.

These measures and actions can be broken down into three categories.

Affirming key values, such as ad hoc visits/coffee mornings by NEDS with a range of staff without Executive presence, Internal Audit comments on positivity of staff to support their work, incentives aligned to behavioural objectives.

Consistent Behaviours, such as adherence to Risk Appetite, Customer feedback, staff surveys , supplier surveys.

Reinforcing strategies, such as behavioural recognition schemes, treatment of customer complaints, analysis of absenteeism and leavers.

Through the SMR, Chairs and CEOs have specific responsibility for the Cultures that are created. Highly cost effective anonymous staff surveys through the BSB are exceptionally valuable to enable benchmarking across the industry and identify specific areas for further analysis. At the Buckinghamshire we fully intend to continue with these as it showed we currently have a set of values that our staff strongly relate to, it will give us trends over time to enable intervention where necessary, and it will demonstrate whether our culture is giving us a competitive edge.

Robin Bailey, Chairman, Buckinghamshire Building Society

Senior Managers and Certification Regime

Exploring how the SMCR - and especially Certification - can be implemented in the most effective way across the sector.

The Senior Managers and Certification Regime is a major regulatory change that will affect all banks and building societies. Responding to recommendations by the Parliamentary Commission on Banking Standards, the government and regulators have together developed a comprehensive framework to ensure better accountability and responsibility for behaviour, competence and culture in banks and building societies. The new framework provides an opportunity for the industry to focus on and demonstrate a culture of professionalism. We are working with firms and regulators to facilitate this, including areas where a common approach across firms could support both the objectives of the regime and the skills and development of the people covered by it.

Professionalism

Evaluating whether a more 'professional' approach to banking would improve behaviour and competence across the industry.

The Parliamentary Commission on Banking Standards found that 'banking culture has all too often been characterised by an absence of any sense of collective responsibility to uphold the reputation of the industry', and argued that a greater focus on professionalism could be an answer to this. Working with a leading team at the University of Leeds, we are researching the issues around professionalism in banking. In particular, we are reviewing how professional qualifications are currently used across the sector, and at whether a stronger role for professional bodies, along the lines seen in some other sectors, like medicine or law, would help raise standards. To inform this work and develop a rounded picture of 'professionalism' and what it means in banking, we are surveying banks and building societies, professional bodies and a wide range of other interested groups, including consumer bodies and investors.

Assessments

Providing an honest and impartial assessment to Boards of progress against objectives on behaviour, competence and culture.

The BSB assessment exercise presents Boards with an objective and impartial view of their firm's culture, identifying where things are working well and recommending areas for improvement. It draws on information not only from Boards and senior teams, but also from employees, investors (or members), trade unions, customer groups and other relevant bodies. In doing so, it will provide constructive challenge to each firm individually, while building a collective understanding of common issues across the industry, or sectors within it. We undertook our first annual assessment exercise in 2015 with ten firms (Barclays, Citi, HSBC Bank, Lloyds Banking Group, Metro Bank, Morgan Stanley International, Nationwide, RBS, Santander UK and Standard Chartered). The BSB itself will not publish individual assessment reports - each firm owns its own report - but key themes and messages will be set out in the BSB's annual report, the first of which will be published in Spring 2016. Given that Board engagement is central to the assessment work, only firms that have their headquarters in the UK are eligible for the full assessment exercise. All firms, including branches of firms headquartered overseas, will however be included in a focused membership-wide survey, which will allow each participating firm to benchmark itself against its peer group.

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