Banking and Misconduct: A Critique of the Cure of Culture

Strangely enough, after controversially abandoning a long-awaited revolutionary review of culture in banking, the FCA has started to invoke the mantra of culture yet again. However, Transforming culture in financial services DP18/2 is a poor discussion paper which misses the "culture" point entirely. Being prescriptive about the panacea of culture is quite an odd thing for the FCA to indulge in yet again. Worse still, the idea that a wider culture is to blame makes a mockery of individual culpability and provokes irresponsibility. Culture, we are misinformed, is a difficult concept to measure. Overall, “it is manageable” but the FCA discourages a “one size fits all” approach and it elects to be non-prescriptive about what any firm’s culture should be. In my view, the calculus of culture is not only measurable but has already been clearly recorded as conduct costs, £264 billion between 2012-2016, by the CCP Research Foundation. The systematic arrangement and coding of these costs shows that bad culture and culpability can be readily measured. No issue is taken here on the good work many of the banks are doing in this space. The conduct costs research was never intended to be a means by which to bluntly expose a bank’s conduct costs. Rather, it was to identify a proxy indicator of culture. CCP Research Foundation readily accepts the limitations of this metric. It would further accept that there are many initiatives, controls and/or mitigants that, if properly implemented, would act to promote good behaviour and outcomes for customers; as opposed to shining a light on misconduct post facto. However, the FCA has elected to ignore this useful research and this failure is a major flaw in the DP18/2 discussion paper.