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Annual Review 2017/2018

NEW APPROACHES

The BSB’s Assessment data, alongside findings from other aspects of the BSB’s work, can help us understand better some of the factors that may promote or stand in the way of raising standards of behaviour and competence in banking. In considering how firms can deploy and address these factors effectively and efficiently (and also gauge the impact of what they do) we are continually exploring new and innovative approaches, working on this with firms themselves, academic partners and others. We are also learning, as we develop this work, from approaches that have been successful in other sectors or countries, and indeed that may be being used in parts of the banking sector itself but are not widely known or applied.

New approaches introduced in 2017

Observational techniques (Ethnography)

Observing people’s everyday behaviour can be an effective means of understanding a group or a society’s culture. Ethnography, as this approach is called, can also be used within an organisation, providing the members (and leaders) of that organisation with detailed, descriptive feedback about group behaviour, habits or norms.

In order to test the value of this approach to BSB members we piloted a series of four ethnography workshops with member firms in the first half of 2017. Run in collaboration with the London School of Economics and Political Science (LSE), the modules covered the theoretical underpinnings of ethnography, practical skills in participant observation, and how to learn from these observations, enabling participants then to apply this approach within their own organisations. Participants were asked to observe behaviour, first around the LSE buildings, before doing so at their own organisations, focussing on what people actually do (rather than what they may say or think they do).

Feedback from participants has been very positive on the value of the techniques learned. Members of the cohort reconvened six months after the course had finished to share their observations and experiences, and said that they were now able to see dynamics within their own firms that they (and their firm) had previously been unaware of.

Given the value of this exercise to those who participated, we will be running a second series of workshops for member firms in 2018. We will consider whether and what further work in this area may be helpful and appropriate.

Sharing learning across firms

Banks and building societies should both compete to provide the best products and services for customers at the best prices, and collaborate to ensure that the sector identifies and upholds high standards of behaviour and competence. Our Assessment work has shown that many banks and building societies, whatever their size, location and business areas, are grappling with similar issues. Collective effort and learning can help to overcome some of the barriers to raising standards, and improve firms’ ability to achieve good outcomes for their customers and clients and for society more generally.

Our ethnography workshops, as well as our work on implementing the Certification Regime, demonstrated in a very concrete way in 2017 the value of sharing learning between organisations; an exchange we are continuing to facilitate through our policy work and events programme. The focus of the latter has, over most of the past year, been on learning from speakers and discussants from sectors other than banking. It also included also an exploration of the relationship between law, regulation and culture, and the shared priorities and objectives on issues of organisational culture across banks, regulators and the judiciary. Of particular note was our event in March 2017 with the Governor of the Bank of England, the President of the New York Federal Reserve Bank and the Lord Chief Justice of England and Wales on ‘Worthy of Trust; Law, ethics and culture in banking’; and we look forward in this context to a BSB lecture on 20 March 2018 by Sir Geoffrey Vos, Chancellor of the High Court of England and Wales.

While hearing and learning from other sectors will remain an important part of the BSB events calendar, we are also now beginning — as both we and our work have developed — to facilitate forums in which banks and building societies share their own knowledge and experience. Our first such seminar, in November 2017, focused on the role of internal audit in managing culture, and was led by senior audit and compliance practitioners from two of our member firms. In our second, in February 2018, the CEOs of two of our member firms spoke about how they made practical use of the information provided in their BSB Assessment Reports. Further such knowledge-sharing seminars are planned over the coming year.

New directions in 2018/19

The creation of ‘BSB Insights’

The BSB is collecting and is responsible for a large, unique and growing data set relating to culture in UK banking. While we have drawn extensively on this information already, there is the potential to do much more with it, especially as it develops over time. A number of participants at our Professionalism Forum supported efforts to develop a ‘thought leadership’ role for the BSB, drawing in particular on information gained through the Assessment.

To help us do this in the most effective and efficient manner — keeping in mind always our aim of helping raise standards across the sector to the benefit of customers, clients, and the economy and society as a whole — we are creating a new unit within the BSB, called ‘BSB Insights’.

BSB Insights will work flexibly and collaboratively with other BSB teams. It will focus on:

  • identifying cultural or behavioural factors that enable, promote or inhibit high standards in banking. We will use the data from the Assessment, alongside other relevant information, to try to identify such factors and highlight potential relationships and dependencies;
  • understanding the causes. This will entail working with subject matter experts and member firms, and may involve reviewing existing literature on an issue (both relating to the UK banking sector, and to other sectors and jurisdictions) or undertaking or commissioning new research; and.
  • helping to test the effectiveness of interventions. As we develop the capacity of BSB Insights, we would like to work with member firms (and with other organisations as appropriate), to explore testing the effectiveness of interventions aimed at raising standards of behaviour and competence, and identifying how they can be designed (or redesigned) to have greater impact.

The new BSB Insights unit will clearly take time to develop. We will start to build it up over the course of 2018, subject to other demands on BSB capacity, but the decision to establish it reflects the BSB’s ongoing commitment to work that is evidence-based, innovative and collaborative, and we look forward as the year progresses to discussing this new initiative further with member firms.

Developing and extending the Assessment exercise

As we begin our third Assessment cycle and look ahead to 2019, we will continue to explore how we can make the BSB Assessment ever more useful for all our member firms. This may include making different uses of existing data sources, exploring new ones, or applying different analytical techniques to the data already collected.

Our new Survey dashboard, introduced in 2017, allows us now to run the Survey at scale. For member firms that are part of global groups, we are now able to use this platform to run the Survey at their overseas operations. This allows an international bank to compare its results across geographies, as well as within its UK business.

We would also be interested to explore how the Survey (and potentially also the qualitative parts of the Assessment) could be applied outside the banking sector and in different types of organisations. While the Assessment was designed with the UK banking sector in mind, the issues it explores are not unique to any particular sector or location. We would be happy to discuss this with any interested firms or organisations over the course of the coming year.

PREVIOUS SECTION: CONSUMER OUTCOMES

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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