Culture and Conduct: A Permanent Mindset Change
As part of our ongoing collaboration with the Group of Thirty, Oliver Wyman and the G30 have produced a new white paper: Banking Conduct and Culture: A Permanent Mindset Change .
2018 marks the tenth anniversary of the global financial crisis. Since then, the industry has devoted significant time and resources to understanding the underlying causes of its cultural breakdowns, and to implementing reforms needed to address the issues. And yet, throughout the last decade, and despite significant efforts, the industry has continued to be dogged by conduct scandals and failures of culture and governance. Trust in banks remains low. And at the same time, the scope of the issues has grown. As a result, banks have endeavored to implement various changes to improve their conduct and culture.
The report focuses on two fundamental questions: 1) How much progress has the banking industry made in conduct and culture ten years on from the global financial crisis, and especially since our last joint report, Banking Conduct and Culture: A Call for Sustained and Comprehensive Reform; and 2) In what areas should banks continue to press on, and what evolving questions should they be mindful of going forward?
We highlight future challenges emerging due to changing societal norms, technological advances, competitive dynamics, and macroeconomic trends.
Fundamentally, getting culture and conduct right is not a supervisory requirement—it is necessary for banks’ and banking’s economic and social sustainability.
1Managing culture is not a one-off event,
but a continuous and ongoing effort that must be integrated into day-to-day business operations.
2Leadership always matters,
and banks must embed conduct and culture messages and expectations from the top down.
3Conduct is not just about purposeful misbehavior,
but also unintended consequences from decisions and/or lack of skills and knowledge.
4Managing culture requires a multipronged approach and simultaneous alignment of multiple levers,
including structural processes and policies, and beliefs and attitudes.
5Diversity must become an imperative for the industry
as it improves outcomes for all stakeholders.
6Behaviors and outcomes that culture drives can and should be measured.
7Regulation has a limited role to play given that culture cannot be mandated or defined by rules.
Supervision can play a role in monitoring and providing feedback to banks that can aid the bank board and senior management in addressing conduct and culture issues.
8Industry-wide dialogue and sharing of best practices are key to restoring trust and strengthening the entire banking industry.
BEHIND THE REPORT
Our live webcast featured the G30 Working Group Leadership members: Chair William Rhodes, Vice-Chairs Gail Kelly and Sir David Walker, Steering Committee Member Gerd Häusler, and Project Director Elizabeth St-Onge. The leadership discussed the results of the study and answer journalists’ questions about the report.
Photo: Gerd Häusler-Steering Committee Member , Oliver Wyman Partner-Elizabeth St-Onge, Chair-William Rhodes, Vice-Chairs-Gail Kelly and Sir David Walker, and Stuart Mackintosh-Executive Director of the Group of Thirty.
As society and the competitive landscape rapidly evolve, banks cannot afford to be complacent about their trust and reputational problems. From a competitive perspective, new entrants are quickly moving into traditional banking space and may capture clients (and talent) that would have otherwise been directed to banks.
An Evolving Journey
It is imperative that banks continue to recognize that the focus on conduct and behavior, on bank culture by boards, senior management, frontline employees, and supervisors, must be an ongoing journey rather than an initiative that can be completed and set aside.
A key to success is recognizing that this is a constantly evolving journey rather than an issue that can be addressed once and forgotten about. Embedding culture, reinforcing levers, and aligning conduct and risk management practices with everyday business is a constant and critical process if we are to see a return of trust in banking among all stakeholders.
We hope the G30’s multiyear focus on governance, supervision, boards, conduct, and culture has supported the collective goals of supervisory and banking communities, and we expect this latest study will add meaningfully to the debate on and discussion of best practices in the sector.