Andrew Bailey: Culture in financial services – a regulator’s perspective Speech by Mr Andrew Bailey, Deputy Governor of Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority at the Bank of England, at the City Week 2016 Conference, London, 9 May 2016. *  *  *  It is good to be at City Week again. Also, congratulations on the welcome approach to the geography of City Week – bringing it to the Oval means that for those of us who live south of the river, we don’t feel that the City always involves crossing into that other land north of the river. Whether the culture is different south of the river is for everyone to judge. I am going to speak today on the subject of culture in financial services. For the avoidance of doubt – and in view of recent history – I want to start with what I intend as an unambiguous statement, namely that the culture of firms and the people that make them up - and of course therefore the culture of industries insofar as it can be generalised – is of the utmost importance to financial regulators. Culture matters a great deal. And this is true for both conduct and prudential regulators. Today I am speaking as the CEO of the PRA, but at the beginning of July I will become the CEO of the FCA. One thing that this move does not require is a change of view on the importance of culture in firms.
We cannot write a rule to take care of every situation that may occur, and as a forward looking supervisor we are applying judgement in conditions of uncertainty about the future. How firms deal with the uncertainty of the future will also shape their culture. I firmly believe that what we can best do in this area is to provide a clear sense of direction and guidance through open communication starting with those of us at the top, in which we are clear on what we expect of firms. Open and transparent communication of this sort should then be supplemented by the clear understanding that we will all stick to the script. Trust is important. Consumers need to be confident in the firms that they choose to use, and inevitably trust is an important part of that confidence. Likewise, as supervisors, our judgements are inevitably conditioned on whether we can trust the people with whom we deal. Good culture is a product of trust and it matters a lot for both prudential and conduct regulators. Culture is everywhere and nowhere in firms; everywhere in the sense that it is shaped and determined by all the features of the firm – its people, organisation, reward structures etc; and nowhere because culture is not a tangible thing sitting on a shelf that can be prodded and changed of itself.