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Banking Standards Board publishes first Annual Review

 

See the Annual Review online or download the pdf (7MB)

 

BANKING STANDARDS BOARD PUBLISHES FIRST ANNUAL REVIEW

“Re-building trustworthiness will be a long haul, but a start has been made” says Dame Colette Bowe

EMBARGOED UNTIL 0001 HRS, TUESDAY 8 MARCH 2016

The Banking Standards Board (BSB) today (Tuesday) published its first annual review, which sets out how the independently led, non-statutory body, has used the last eleven months to both support and challenge UK banks and building societies as they work to re-build trustworthiness in banking.

Dame Colette Bowe, Chairman of the BSB, welcomed the engagement of firms operating in every area of the market – retail, investment and commercial, and banks, building societies, incumbents, challengers, branches and subsidiaries – and thanked the 10 institutions that participated in the 2015 pilot assessment exercise.

Commenting on the annual review, Dame Colette said:

“Like all businesses, firms in the banking sector have responsibilities that go beyond compliance. Regulation, although vital for well-functioning markets simply isn’t the answer to every question. And if we want to see a change in culture and standards of behaviour right across the sector, individual institutions, owners, investors and the people leading and managing them, all need to step up to the plate.

“When the BSB was launched last April, with the appointment of its Board members, a key priority was the assessment work, intended to provide boards and senior executive teams with evidence that would help them judge whether and how far they were meeting their objectives on behaviour, competence and culture. Shining a spotlight on how aligned what they say they want to do is, with what is actually happening on the ground.

“The detailed individual reports drew on a variety of different information sources, from boards and CEOs themselves, to face-to-face employee interviews and focus groups, as well as wider third party sources including trade unions and investors.

“Our discussions with Chairmen and boards following completion of the individual reports have been constructive, open and honest. But the purpose of the assessment exercise is not just to deliver a report, but to help bank and building society boards be as effective as they can be when serving their customers.  I look forward to the BSB’s ongoing dialogue with these firms over the coming year, and to building on this work with more firms from across the sector.”

Cross-cutting themes

The 6 cross-cutting themes identified in the BSB’s first Annual Review were;

  •      Purpose, values and culture

Is a firm’s purpose understood and ‘owned’ across the organisation? Are purpose, values and culture fully aligned, or are there tensions between any of these elements, especially in stressed or uncertain environments?

  • Culture and conduct

How far does a firm’s strategy for managing culture go beyond managing conduct risk? Is it focused on avoiding misconduct costs, or does it look more broadly at what influences behaviour and motivation across the firm?

  • Leadership and key person risk

Strong leadership, and leadership by example, are key to a good organisational culture, but how do firms ensure that cultural momentum is not dependent on one individual? What is the role of the board, senior teams and middle managers?

  •        Incentives and rewards

Are these aligned with the firm’s purpose, value and culture? What is the role of Remuneration Committees in shaping culture? How are firms managing the transition from sales targets and any unintended consequences?

  •        Challenge and speaking up

To what extent do firms create and foster an environment in which staff feel free to speak up if something isn’t right, or could be improved? What are firms doing to encourage diversity of thought and experience within their workforces? How are they measuring this?

  • Provision, take-up and effectiveness of staff training and support

How are training and development used in practice? Is this consistent with the firm’s objectives on culture? How is the impact of training on staff behaviour and competence, and ultimately on customer and client outcomes, measured? How does this inform future training?

Dame Colette continued;

All of these cross cutting themes are big issues – some of the essential building blocks of corporate culture – and can only be tackled through coherent and concerted effort. Every firms starting point is different but the collective challenge for the sector is very large. Rebuilding trustworthiness in a credible and sustainable way will be a long haul but a start has been made. ”

The Governor of the Bank of England, Mark Carney, commenting on the BSB’s first year, added;

“This initiative is hugely important to the development of the whole of the banking industry. I have been very encouraged to see how quickly the BSB has got up and running and it is no surprise that the UK is now seen as out in front when it comes to non-regulatory moves to tackle behaviour, competence and culture.”

Looking ahead to the 2016 work programme, Alison Cottrell, Chief Executive of the BSB made clear that the pace and range of the organisation’s work would continue to increase as it built on its first year.

Commenting on the year ahead, Alison Cottrell added:

“The BSB has come a long way very quickly since its launch in April 2015. It will maintain this momentum over the coming year, building on the work outlined in this first annual review to support and challenge the industry in its efforts to build trustworthiness and demonstrate credibly that it puts the interests of its customers and clients at the heart of its business.

“The 2016 assessment will build on last year’s pilot exercise and be more systematic and comprehensive. It will cover a greater number of firms and  incorporate quantitative approaches enabling firms to benchmark themselves against their peer group, adopt techniques to enhance our understanding of what influences behaviour, and be informed by the views of a wider population of the sector’s stakeholders.

“Alongside the assessment work, the BSB will also focus on promoting professionalism across all parts of the banking industry and at all levels, including through effective implementation of the certification regime; exploring the relationship between law, regulation and ethics, and what this means in the context of banking and banking culture; developing voluntary standards that will support a better service for customers; and fostering and facilitating learning from within and outside the banking industry.

“It is not the BSB that will raise standards in the banking sector; only the industry itself can do that. It is no small task, and it will take action and time.  But when staff working in banks and building societies across the UK can say not just that they are proud to work for their own firm but that they are proud to work in the banking sector, something will have changed. “

 

-ENDS-

Notes to Editors

Please click here to access the BSB Annual Review.

The BSB has joined forces with FT Live and The Banker and will be presenting the FT Banking Standards Conference on 8 March 2016. https://www.bankingstandardsboard.org.uk/events/ftconference2016/ .

Any journalists wishing to attend should contact press@bankingstandardsboard.org.uk .

 

 

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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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