New financial watchdog boss says UK bank culture a top priority

by Jonathan Adams

Improving the behaviour of banks is a top priority for Britain’s financial market watchdog, its incoming head said on Monday, despite a decision to ditch a review into their culture.

The Financial Conduct Authority (FCA) shelved a review into banking culture in December last year, triggering views that the government was softening its stance on regulation.

Improving the way they operate is seen as core to restoring trust in banks that have been fined billions of dollars for trying to rig interest rate benchmarks and foreign exchange markets.

Andrew Bailey, Deputy Governor of the Bank of England, who takes up the reins as chief executive of the FCA in July, said his appointment did not mean any let-up.

His predecessor, hardliner Martin Wheatley, was ousted by the government in what was seen by critics as a softening of tone towards lenders.

Bailey told the annual City Week financial services conference, “One thing that this move does not require is a change of view on the importance of culture in firms”.

After forcing banks to hold more capital, regulators are turning their attention to improving behaviour or culture.

“As regulators, we are not able, and should not try, to determine the culture of firms. We cannot write a regulatory rule that settles culture,” Bailey said.

Bailey said, “We seek to ensure that firms have robust governance, which includes appropriate challenge from all levels of the organisation”, adding that a change of culture was possible and there has been progress at the banks.

Britain has already introduced some of the world’s toughest rules for bankers, from pay to legal responsibility for decisions made by them.

Chris Cummings, chief executive of TheCityUK, which promotes Britain as a financial centre, said U.S. bankers tell him they now detect a “more seasoned” British approach to regulation.

“What I hear now from government is ‘how can we make sure there are new jobs being created’,” Cummings said. “My sense is that we are turning the corner.”

Nathan Bostock, chief executive of Santander UK (SAN.MC) bank, said Britain should not ignore that domestic regulation has a fundamental influence on inward investment.

Many new banks are being set up in Britain but they are small and specialist, while global investors with billions of pounds to spend want consistent regulation, Bostock added.

Charles Roxburgh, director general for financial services at Britain’s finance ministry, told the same event that good regulation was a precondition for competitiveness.

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