Whilst the wanton act of corruption is, in itself, deeply
disturbing, what makes it particularly shocking is that it was happening at a
time when many of the senior executives in the banking sector were opining that
the industry, whilst not yet being perfect, had significantly cleaned up its
act and was now once again trustworthy.
It hadn’t and it wasn’t.
So were the apologist executives actively lying about the
state of their industry or were they just as in the dark as the rest of us as
to the shady goings on within their institutions. Outside of a court of law I guess we will
never know the answer, however, I would not be surprised to find that a number
of them were even more surprised and disappointed by the actions of the FOREX
traders than the general public. Why? Because I think a number of them genuinely
believed they had done all that was necessary to protect their Bank from
serious compliance breaches. However,
based on the evidence and supporting anecdotes all they had done was to ensure
that the compliance boxes were ticked.
What they had struggled to deal with, in any meaningful way, was the
same pernicious culture of “bankers self interests” that had underpinned the
2008 crash.
Strangely, contrary to public opinion most Banks believe
themselves to be over run by compliance and risk staff – the people whose job
it is to spot and stop errant behaviours.
Bankers are forever being asked to complete mandatory compliance
training, complete risk assessments and participate in internal audit
activities. So how on earth, at some of the most “protected” banks, (i.e. those
with the largest risk and compliance departments) can such a massive set of
non-compliant behaviours not get picked up and stopped at a much earlier
stage? How is it possible, given the
compliant exhortations and sentiments of the Chief Executives, that FOREX
traders still think it is OK to form a cartel and fix the exchange rates to the
detriment of their customers?
The answer is relatively simple to articulate and elusively
challenging to enact. Culture change.
The FCA are now very fond of reminding their regulated firms
and those applying for regulation, that complying with regulation, both the
spirit and the letter of it, maintaining a “culture of compliance” and
delivering fair customer outcomes (and nothing less) is what they are expecting.
However, from my most recent experiences of working within
major financial institutions it still appears to me as though the Banks are
missing the point on what the FCA is actually looking for.
As part of a recent assignment I had to complete
a series of mandatory training modules on compliance and risk in order to be
able to work within a particular bank. I
believe that the total time required for me to complete the training was
approximately 6 hours. The modules
covered the banks approach to risk, compliance, fraud, bribery anti-money
laundering etc, etc and were very comprehensive. Surely the bank
could do no more in preparing me to work in a compliant way? Well yes and no.
What struck me as odd as I worked my way through the well
prepared materials was the focus of the training. Almost all the modules concentrated on
informing me of the actions that I needed to take to protect the bank from
financial and reputational risk – not a bad thing in itself – but what almost
all the training modules failed to do was emphasise the need to do the right
thing for the customer and to drive positive customer outcomes. In essence, there was still a faint whiff of
the old masters of the universe thinking in the materials. Banking is for bankers.
In my opinion, if the banking industry is truly going to
adopt a culture of compliance then they will have to navigate away from the
bank and bankers being the primus inter pares to the customer and the
customer’s outcomes taking that position.
Until that place is reached there will continue to be a regular (all be
it somewhat reduced) flow of breaches and scandals that will have the Chief
Executives of banks wringing their hands and scratching their heads.
So how do they get there?
Unsurprisingly there are a myriad of actions required over an extended period
of time. However, here are a few that
appear obvious to me.
1. Ensure the voice of the customer is prominent in
all compliance training
2.
Review technology, products, processes and
policies from an end to end viewpoint to ensure that they are actually
delivering positive customer outcomes
3.
Invest in a targeted culture change programme to
increase the focus on the customer
4.
Spend more time listening to the voice of the
customer at senior manager level
There are a course a million others but that’s for another
blog. Do get in touch if there’s
anything you’d like to agree or disagree with in the blog or whether you
recognise the issues in your Bank and would value some advice and support.
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