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Annual Review 2017/2018

CHIEF EXECUTIVE’S REPORT
ALISON COTTRELL

The BSB exists to help raise standards of behaviour and competence across the UK banking sector, to the benefit of customers, clients, the economy and society as a whole.
Each element of this matters, and none more than the last. Higher standards of behaviour and competence are important because of (and should be judged by) their impact on those that the banking sector serves. This includes most directly, customers, clients and building society members, but extends also to the hundreds of thousands of people who work in the sector, and to the broader society that grants banking its ‘social licence’.

The BSB Assessment Framework is built around a set of characteristics that we would expect to be associated with good outcomes for customers and clients. Our annual Assessment exercise asks how far these characteristics are demonstrated within a firm, drawing primarily on employee perspectives (though as our work develops we will also consider whether and how other types of information might usefully be incorporated, or inform the analysis).

Last year’s Annual Review set out the findings of the 2016 Assessment; a snapshot and a baseline, given that this was the first such exercise. The 2017 results described in this Review allow us for the first time to see where change has occurred – subject, of course, to some very large caveats. Two data points do not make a trend. Either may prove in retrospect to have been an aberration, and the causes of any change may lie in actions or events that happened well before our baseline year. The results of the forthcoming 2018 Assessment will clearly constitute an important next step in the development of the evidence base.

This second data set provides, nevertheless, a unique and valuable source of information on organisational culture in banking. That it is being collected at all, reflects also a willingness on the part of the firms and boards involved to invite external challenge and to ask themselves questions that may produce uncomfortable answers. Far easier would be to avoid asking such questions in the first place.

Analysis of the Assessment results across individual firms allows the BSB to begin identifying factors that may be associated with positive (or negative) scores or changes. This, in turn, informs our work with member firms collectively to develop and share good practice, thereby raising standards across the UK banking sector. The value of the BSB’s facilitative role has been evident in the active sharing of knowledge and experience within our Certification Regime Working Group, and the consequent (and ongoing) development of a body of guidance on implementing the Certification Regime. We hope that this guidance will benefit firms and customers not only in banking but also, as the regime is extended, elsewhere in the UK financial services sector.

Good practice guidance is relevant to raising standards of both behaviour and competence. Having the right skills but the wrong intentions is clearly unacceptable on the part of anyone working in banking; so too, is being well-meaning but lacking the capability to do the job. The BSB’s Professionalism Forum, chaired by Sir Brendan Barber, has seen firms, professional bodies, qualification providers, regulators, trades unions and others from within and outside the sector coming together to consider what professionalism in banking means for all those involved. The role of firms in promoting and encouraging professionalism is the subject of a new BSB Statement of Principles, published in this Review and drawing on the work of the Professionalism Forum and its supporting Working Group.

Thank you to everyone who we have worked with and learned from over the past year. Within our member firms, this includes not only boards and executive teams for their ongoing commitment and engagement, but also the many thousands of people who shared their thoughts and views in the Assessment exercise. We are grateful also to the many individuals and organisations (both within and outside the UK banking sector) who have contributed to working groups and forums, participated in events, responded to consultations, shared their knowledge and helped us develop our own capacity and capability.

We look forward to continuing to work with both member firms and a wide range of partners and organisations over the coming year. The 2018 Assessment will enable us to broaden and deepen our evidence base, and we will extend our analytical capacity and reach through the creation of a new BSB Insights team. We will also continue to explore issues of practical relevance to firms within each of our three ongoing thematic areas, i.e. the alignment between a firm’s stated values and its behaviour, creating a culture of accountability and responsibility rather than of blame, and the personal resilience and wellbeing of employees.

The BSB’s Assessment approach looks at organisational characteristics that we would expect to be associated with good outcomes for a firm’s customers, members or clients. We are interested, however, in understanding better the links between organisational culture and outcomes. Following our recent consultation on what good outcomes look like to consumers, and informed by engagement with a wide range of consumer and civil society bodies, we will be taking the next steps in developing this aspect of our work.

An approach such as the BSB’s can work only if firms themselves are committed to making it work. The BSB cannot itself raise standards of behaviour and competence across the banking sector. Only firms can do this. The BSB can, however, help those firms that wish to do this, through the provision of independent, impartial and informed support and challenge.

The challenges involved in creating and maintaining a good organisational culture are not unique to banking. Given, however, the sector’s size, role and inter-connectedness, the consequences of failing to do so can be particularly far-reaching. Banking is a service sector, and all of those that it serves, and everyone who works in it, should be able to feel proud of it. Ensuring that the UK banking sector is deserving of pride – and worthy of trust – is in the hands of banks and building societies themselves.

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Alison Cottrell, Chief Executive

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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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