I have been thinking recently about how we should deepen the conversation on conduct and culture with the Financial Services sector.
And right now - across the globe - conduct and ethics in FS is top of the list. Here, too, it is close to our hearts. I’m not going to give you a lecture on culture, especially tonight, but I thought I would try to set out where we as the ‘conduct regulator’ are expecting to operate.
What is the lens we use when we look at you; when we engage with you; when we see what happens with your customers and investors?
First and foremost, the FMA doesn’t set culture - that’s your job. Nor are we going to run ‘culture diagnostics’ on your business or give you a handbook for achieving a preferred culture.
But we all know that culture is critical; it drives how your people behave, it drives what actually happens at your firms and, in the end, what your customers experience and how they are treated. Whether the services and products they get from you, do the job they need them to do.
Your culture drives your conduct.
So – when we look at areas where we think, or we know, that customers are getting a raw deal; when we look at behaviour we don’t like in wholesale markets; when, in short, we look at poor conduct; we will be looking for cultural problems, and the indicators of those problems.
Culture is not formed by a poster in the lunch room. It is not formed by a one-off ‘sheep dip’ training exercise. It is formed by what your people see happening in their peripheral vision. What their colleagues do, what their leaders – what you in this room do - is what they take their behavioural cues from.
It’s how they decide whether the pep talks they get and the posters they read are real, or just hot air. They look at those posters with inspirational quotes and sunsets, and they test them against the real indicators of culture.
These are the same indicators we pay attention to:
We will look at what goes well, and what doesn’t go so well. We’ll ask ourselves, and then we’ll ask you:
I said earlier that all of this is top of the list across the globe, and it is. The FSB and IOSCO and the G20 group have all spoken out on conduct and culture as a major cause and certainly a major exacerbating factor in the last crisis. And across the globe, organisations like ours are responding.
Here in New Zealand the major planks of the FMC Act are in place, with a design objective to promote confidence in the regulated sectors and indeed in the regulator itself:
Looking elsewhere, the UK:
The effect of all this, and what went before it, is that the reputation of FS is worse now than it has ever been. We are actually a bit of an outlier in this. Compared to other jurisdictions, FS doesn’t have pariah status here. Even after the finance company melt down and issues like the mis-selling of IR swaps.
We can all be thankful for that but, as I have said repeatedly since I took this role, it won’t take much and the damage can be years in the repairing. And it is for that reason we care - and you should care – not about what you say to your staff but the examples you – as the leaders of the industry – set for them. And the image you portray to the NZ public.
I congratulate everyone who is up for an award tonight because it is right to be recognised for what you do, not what you say.
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