Is developing organisational Culture within your financial services company one of your priorities?

There’s an increasing focus on Culture within the financial services industry being led by the FCA which has increased the level of discussion, and set out its stall:  “The Culture of our regulated firms is and always has been vital in our regulation of their conduct.” Said Jonathan Davidson, Director of supervision, FCA.

The FCA has made Culture one of its seven priorities for the 2016/17 year, as outlined in the newly launched business plan. This means Culture is now a central topic to the policy work, thematic projects and the day to day activities of the FCA.

So now we know Culture is important for the regulator, but how does it define Culture?

At the Annual Culture and Conduct Forum on July 12, 2016, Jonathan Davidson, stated the FCA views Culture as; “The typical, habitual behaviours and mind-sets that characterise a particular organisation. The behaviours are the ‘way things get done around here’; they are the way we act, speak and make decisions without thinking consciously about it.”

Underpinning these behaviours or habits is an individual’s mind-set. A person’s mind-set is the beliefs and values that they deem important. These aren’t tangible, making them difficult to measure. However, they are viewed as having significant impact on the behaviour throughout an organisation, all the way up to the board. The FCA views incentives inherent to a business as the biggest influencer of a person’s mind-set. Appropriate incentives within your firm will act as a guide to the Culture you are building. The FCA will carry out a review into the remuneration and incentives within the consumer credit sector.

The FCA believes Culture is vital in developing successful firms and strengthening the trust of the industry as a whole. However, this doesn’t mean there is an effective ‘off the shelf’ Culture that can be implemented across the industry. With no prescribed industry culture for all firms to conform to, which in itself would be an almost impossible task, the onus is on the firms themselves to develop a Culture that meets the regulator’s expectations.

Ultimately the FCA expects all firms to make Cultural changes and avoid a repeat of the failings previously seen within the industry. The industry needs to be moving forward and placing a greater emphasis on doing the right thing by the customer. Changing Culture is no overnight process and the regulator admits it’s a notoriously difficult task. The FCA understands Culture to be resilient in the face of attempts to change it, which is why it is important to understand how to begin implementing these changes effectively.

The FCA has highlighted the following four ways that it expects leaders to shape culture;

The tone from the top – They are interested to see how leaders are role modelling the professed culture. By this they are looking at weather culture is a regular item for board discussions as well as looking at the changes being made to break from previous cultures.

Formal, tangible practices and cues – This is all about staff being told what they need to do in order to be successful. This in theory should ensure the right people are employed and the appropriate members of staff are progressing through to leadership roles.

Narratives that circulate a firm – The FCA will look closely at all the information that circulates within a firm to explain what the firm is trying to achieve and why, along with how they plan to do it.

Capabilities of an organisation – In order to learn a new mind set and behaviours will in many cases require a firm to learn new capabilities themselves to allow them to meet the new demands.

The FCA will be looking for firms that can identify issues and take a robust, consistent and persistent approach to bring about change.


Make sure your company Culture is developing as it should whilst meeting regulatory requirements? Please join us for our Culture & Ethics briefing for senior management and board members.

Julia Kirkland, Senior Partner of FSTP said; “From experience very few firms, in the first instance, are able to articulate what their culture is.  Our briefing helps you work through both academic and regulatory indicators of culture so you can walk away with a list of areas to consider and work on your own culture definition, which has to be your starting point”