adminLONDON – Bankers need to walk a fine line between embracing regulation while remaining innovative and competitive. Striking a balance in bank culture and conduct will be the most challenging of all post-financial crisis reforms.
Recently the Group of 30, a forum of leaders in international finance, released a report called Banking Conduct and Culture in which they bemoaned the failure of major banks to get to grips with much needed cultural change and made recommendations for fixing this.
Based on nearly 80 interviews with senior bank management and regulators in 16 countries, the report says: “Banks are, to varying degrees, still failing to implement desired ethics, values and behaviours, and weaknesses in embedding values and codes of conduct for all staff are widespread.”
At the same time bankers in London tell me that aspects of the Senior Managers Regime, due to come into force in March 2016 in the UK, are causing huge consternation and in terms of a deterrent to business one compares it unfavourably to European Commission proposals for a financial transaction tax to cover 11 eurozone countries, including France and Germany.
Of great concern is the ‘presumption of responsibility’, which reverses the burden of proof and insists that banks show they did take proper actions to prevent abuse.
Says an EY report: “Tensions are likely to arise between safeguards the corporate body considers sufficient and those individuals believe are necessary.”
When all is said and done, bank managers do need to take decisions and these are done in the cut and thrust of the business day rather than in the clinical environment of the courtroom.
Nevertheless, as the G30 report notes, winning back public trust in banking has a long way to go and the place to start is with culture and conduct.
The report places great emphasis on the board setting the right tone. (Under the Senior Managers Regime chairman and non-executive directors are as culpable for board decisions as the rest of the board.)
It also discusses the challenge of managing behaviour in ‘grey zones’ – where judgment is needed over and above pure legal requirements – the need to protect whistle-blowers, and the need to impose pay cuts and dismiss staff when things go wrong.
All well and good, but the culture we end up with in banking cannot be so suffocating as to stifle all initiative and risk taking.
It’s a very difficult balance to find. – The Banker.
Online Reporter