Banks Under Scrutiny: Central Bank Demands Action Plan to Improve Culture and Conduct
The Central Bank has issued a stern warning to the country’s top five banks, demanding they develop action plans to address cultural and conduct issues identified in recent reviews. The regulator is currently assessing the banks’ proposed solutions and will closely monitor progress to ensure compliance.
A Call for Cultural Shift
In a scathing critique, the Central Bank emphasized that each bank must take ownership of its own culture, recognizing that no two organizations can have identical values and practices. However, effective cultures share a commitment to high standards and consumer protection at their core.
Key Features of an Exemplary Culture
- A clear set of values and expected behaviors that prioritize consumer interests
- Senior leadership’s visible support for desired values and conduct
- Sanctioning employees who fail to uphold consumer-focused behavior
- Performance management systems that incentivize consumer-centric practices
Driving Better Behavior
The Central Bank is pushing for individual accountability measures to drive better behavior. These include:
- Proposed Conduct Standards for all staff
- Additional standards for senior management
- Standards for businesses
The regulator also recommends implementing a Senior Executive Accountability Regime (SEAR) through legislation, which would assign clear responsibility and decision-making authority within firms.
“We want to see boards and senior management setting the tone from the top by focusing on effective culture and values,” said the Central Bank’s representative. “This is not just about compliance with regulations; it’s about creating a lasting cultural shift that prioritizes consumer protection.”
Examples of Successful Cultural Transformations
The regulator cited examples of successful cultural transformations, such as improved road safety and reduced smoking rates, achieved through a combination of legislation, regulation, industry action, and social change.
Banking Sector’s Role in Shaping the Cultural Shift
In a nod to the banking sector’s role in shaping this cultural shift, the Institute of Banking has launched courses to equip bankers with the knowledge and tools needed to lead and embed effective cultures within their organizations.