Is it legal? A Question of Culture - Address by Deputy Governor Ed Sibley to Eversheds Sutherland conference

• Tracker mortgage scandal is the latest in an unacceptably long list of cultural failings in financial services firms
• Restoration of trust in financial services is vital for the system to be effective in serving the economy and its customers sustainably over the long term
• Cultural change is as urgent as technology, business model and regulatory changes

Full speech

Deputy Governor, Prudential Regulation, Ed Sibley, this morning addressed an Eversheds Sutherland conference on “Leadership and Culture Change in Financial Services”.

In a speech titled “Is it legal? A Question of Culture”, he addressed the importance of culture in a well-managed and well-regulated financial system, which serves the needs of the economy and customers over the long term.

Deputy Governor Sibley noted the tracker mortgage scandal as an example of an ‘is it legal?’ attitude, which still pervades in too many institutions.  He said the Central Bank is under no illusion that “continued and concerted pressure is required to ensure all affected customers receive redress and compensation and banks comply with our findings.”  He said he expects all the main banks will be subject to Central Bank enforcement investigations.

Mr Sibley noted that the Central Bank continues to enhance its approach to behaviour and culture.  He said:

“Work has been undertaken in banks and insurance firms from a prudential perspective, and in the consumer area we have developed a framework for the assessment of culture in regulated entities.  As has been well documented, this work will be expedited across the retail banks over the coming months, and be rolled out further after that.“

A standardised culture across firms is not desirable, he said, but the Central Bank expects firms to “critically evaluate their culture, considering what type of culture they want to develop, how staff are incentivised to behave, and to be held to account as to whether the culture they want is the culture they have and how would they know if it is not”.

On the importance of diversity at a leadership level in addressing behaviour and culture risks, he noted the acute imbalance in gender and other aspects of diversity in financial services firms, which needs to be addressed, and which will be the subject of further Central Bank scrutiny.  

He concluded by telling attendees that:

“There are real opportunities for leadership - to turn the dial, to drive change, to differentiate positively, to show: that the mistrust is no longer valid, that lessons have been learnt, that you have demonstrably, definitively and permanently changed, and that the behaviours and cultures by and within your firms and industries are in the long term interest of both your customers and your shareholders.”

He said that the opportunity for culture change is every bit as urgent as the technology, business model and regulatory changes that are frequently focused on in the financial sector.

Notes

·       Deputy Governor Sibley also spoke at the Association of Compliance Officers in Ireland annual conference on Friday 10 November.