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BSB publishes Annual Review 2016/2017

Review presents a picture of the sector and identifies areas of good practice but attitudes and behaviour that still need to change, says Colette Bowe

The Banking Standards Board (BSB)1 has today (Tuesday 14 March 2017) published its Annual Review 2016/2017. The report is the first of its kind, not just because 2016 was a landmark year for the BSB as it opened for membership, but because it paints a picture of the banking sector based on the views of more than 28,000 people working in banks and building societies across the UK, who responded to the BSB Employee Survey, as well as hundreds more who took part in focus groups and executive and non-executive interviews.

Colette Bowe, Chairman of the BSB, welcomed the engagement of a diverse range of firms, all keen to learn more about managing their own organisational culture. She highlighted examples of good practice seen across firms, which showed commitment to serving customers well and raising standards of behaviour and competence but she also drew attention to deep-rooted attitudes and behaviour that still exist and need to change.

Commenting on the Annual Review, Colette Bowe said:

‘I want to thank all of the banks and building societies that have committed to raising standards of behaviour and competence across the sector by joining the BSB and taking part in the BSB’s assessment and policy work.

The BSB’s Assessment2 found examples of good practice across the banking sector but also identified some deep-rooted attitudes and behaviour that still need to change.

Responsiveness, accountability, personal resilience and openness are all areas requiring progress. Firms need to speak honestly and bravely about what needs to be done, what they are doing, why they are doing it and how they will know that they are succeeding.

Everyone in a firm needs to see that executives and board members live up to what they say they are trying to do. Actions speak louder than words. And they all need to be saying the same thing.’

The BSB Annual Review 2016/2017 gives an overview of the BSB’s work to date, sets out its priorities for the year ahead, and reports publicly on the evidence and observations about firms in the banking sector from the 2016 Assessment.

The BSB Assessment2 devised with the help of leading academics in the fields of organisational psychology and ethnography from the London Business School and London School of Economics, does not measure or rank culture as such. Instead, it examines how far a firm demonstrates characteristics (honesty, respect, openness, accountability, competence, reliability, responsiveness, personal and organisational resilience, and shared purpose) that the BSB expects to be associated with any good culture in banking.

The Assessment had a quantitative element, based on the results of a newly developed employee survey:

  • More than 28,000 staff from 22 banks and building societies across the UK provided their views through the Survey
  • This Survey enables firms, for the first time, to compare themselves with other firms (and different business areas within the firm, with equivalent business areas in other firms)
  • The results of the 2016 Survey provide a base-line against which change can now be measured, in 2017 and in subsequent Surveys.

And it had a qualitative element, exploring issues and themes in greater depth:

  • 14 of the 22 firms that took part in the Survey, also took part in the qualitative exercise
  • 104 focus groups took place, involving more than 800 junior and middle-ranking bank staff
  • 114 one-to-one interviews were conducted with executive committee level staff
  • 26 one-to-one interviews took place with non-executive directors including chairs of Remuneration and Culture Committees, and
  • A set of questions about the firm’s purpose and culture was sent from the BSB Chairman to the Chairman of each of the 14 firms that took part in both the Survey and the qualitative component of the Assessment.

The Boards of the participating banks and building societies received their individual firm reports at the end of 2016 and firms have been discussing these with the BSB.

Mark Carney, Governor of the Bank of England, commenting on the BSB’s progress, said:

‘Whilst firms are responsible for managing their culture, behaviour and competence, BSB membership provides the impartial challenge, support and assessment needed to do this well. I support this unique, non- regulatory initiative that the UK is leading the way with.’

Andrew Bailey, Chief Executive Officer, Financial Conduct Authority, said:

‘Regulation needs to be accompanied by high professional and ethical standards within firms. As its latest annual review shows, the BSB is playing an important role in supporting and challenging firms across the sector, both in its independent assessment and benchmarking, and through facilitating cross-industry collaboration and developing good practice guidance. I would encourage all firms to support this valuable initiative.’

The BSB’s work over the coming year will focus on three distinct themes:

  • understanding and helping to address the mismatch in many firms between the values espoused by the firm and the way that some employees see business being done;
  • helping to develop a culture within the banking sector of responsibility and accountability rather than of blame. Good customer and client service requires a culture in which poor performance and behaviour have consequences, certainly; but it also requires one in which mistakes are learned from, ideas encouraged, professionalism prized and diversity of views valued and fostered; and
  • identifying practical steps to help promote personal resilience and wellbeing among employees, so that employees working in UK banks and building societies are able to serve their customers and clients well.

In exploring these issues the BSB will not only lead work but also, as appropriate, support or partner with organisations sharing similar or complementary aims, including in other jurisdictions and outside the banking sector.

Supporting these themes over the coming year the BSB will develop further Statements of Good Practice (following the publication in February of its first guidance on assessing fitness and propriety under the new Certification Regime). The BSB will also work with professional bodies, qualification providers, firms and others to facilitate and promote work on professionalism in a new Professionalism Forum, chaired by BSB Deputy Chairman Sir Brendan Barber.

In exploring these issues the BSB will not only lead work but, as appropriate, support or partner with organisations sharing similar or complementary aims, including in other jurisdictions and outside the banking sector.

BSB CEO Alison Cottrell added;

‘All banks and building societies are not the same. The sector contains – as, very often, do firms themselves – examples of both good and poor practice. And being of a particular size, type or business model neither guarantees a good culture nor provides an excuse for failing to achieve a better one.

The challenge of creating or maintaining a good culture is not unique to banking, or indeed to the UK or the 21st century. The consequences of a poor culture in banking are, however, extraordinarily far-reaching, affecting the economy and society as a whole. For the UK banking sector, raising standards of behaviour and competence is simply not a challenge; it is a responsibility, and one that needs to be owned by every bank and building society today.’

Colette Bowe concluded:

‘The BSB exists to help, challenge and support firms committed to managing their culture and, collectively the culture of their sector. Over time, our annual survey will provide evidence of firms’ progress, or lack of it, to help ensure their culture works for customers, members, clients, the economy and society as a whole.’

– ENDS –

Notes to Editors

1. The Banking Standards Board was established in April 2015 with the aim of helping to raise standards of behaviour across the UK banking sector. It was set up following the report by the UK Parliamentary Commission on Banking Standards. The BSB is a non-statutory, voluntary membership body open to all banks and building societies and is funded by its members.

2. The BSB’s first systematic Assessment had both qualitative and quantitative elements and was based on a newly developed framework: http://www.bankingstandardsboard.org.uk/approach/. 22 member firms participated in the Survey and 14 of these also took part in the full Assessment. See http://www.bankingstandardsboard.org.uk/assessment/

3. Please click here to access the BSB Annual Review 2016/2017: http://www.bankingstandardsboard.org.uk/annual-review-2016-2017/

4. A selection of attributable quotes from BSB member firms is set out below.

BSB Annual Review 2016/2017 – quotes from BSB member firms

 

Andrew Craddock, Chief Executive Officer, Buckinghamshire Building Society:

‘Throughout 2016 the BSB has provided an excellent fora for cross sector debate, discussion and the development of best practice for the proportionate application of regulation, for example through the certification working group. In addition, by being involved in the culture assessment survey we’ve been able to answer a question that’s been left unanswered for years….how do we compare to other organisations? This external benchmarking has enabled us to feel justly proud of our position but also reinforced discussions on what we can do to maintain and continually enhance the positive environment we have.’

Patrick Crawford, Chief Executive, Charity Bank:

‘As an ethical bank, Charity bank is a keen supporter of the BSB’s work to raise standards of professionalism and behaviour across the banking industry. The certification regime working group is an excellent example of how, under the direction of the BSB, banks large and small have been able to come together to share best practice and learn from each other in a collective attempt to address many of the issues and challenges faced by the industry.’

Antonio Simoes, Chief Executive, HSBC Bank plc:

‘Ten years on from the beginning of the global financial crisis, trust in banks remains the key challenge facing the industry. The BSB Annual review provides an important reference point and a guide for improvement across the sector.’

Colm Kelleher, President, Morgan Stanley:

‘Morgan Stanley’s long-standing commitment to high-standards of behaviour and competence is integral to the way we work. Our partnership with the BSB not only reflects that commitment but also helps ensure that we maintain and enhance it in the future.’

David Roberts, Chairman, Nationwide Building Society:

‘Nationwide is committed to the highest standards of customer service for its members and being part of the BSB allows our business to help raise standards across the whole banking sector. The BSB’s rigorous Assessment process and benchmarking has also provided valuable, independent information which will help ensure that the culture in our business is the best it can be.’

Richard Doe, Managing Director, Paragon Bank:

‘Our people are at the heart of everything we do and we understand the significance and value of building a strong culture to deliver the best outcomes for our customers. Being a member of the Banking Standards Board is tremendously valuable as it provides the opportunity to participate in discussions across the sector, to share and identify best practice and to benchmark our progress against others through the BSB Assessment survey. At Paragon Bank, we are committed to supporting the valuable work being led by the BSB, to ensure our sector promotes the highest standards of behaviour and competence across the UK banking industry.’

 

 

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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