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Annual Review 2015/2016




The Banking Standards Board (BSB) was established in 2015 to help raise standards of behaviour and competence across the banking sector. Its existence reflects the recognition that, while effective regulation is vital for well-functioning markets, regulation is not – and cannot – be the answer to every question. Firms, and individuals within firms, have responsibilities that go beyond compliance. The way those responsibilities are met will depend on the norms, values, expectations, reward structures and role models, and the many other visible and invisible characteristics that shape behaviour in each firm – in other words, by a firm’s culture.

The responsibility for culture lies with the board of each firm and with its executive team. It is a responsibility that extends beyond the level of the individual firm, to the sector as a whole.

Firms which join the BSB are making a positive and public statement about the responsibility of the industry to manage the culture of the banking sector, and of their willingness to work individually and collectively to raise standards and demonstrate trustworthiness across the sector. The BSB will support and challenge its members in their efforts, promote the sharing of good practice and new ideas, and report on progress or areas of concern.

This first annual review looks back over the work of the BSB’s first few months, and ahead to its priorities for the coming year. These priorities reflect, in part, the themes that emerged from our first pilot assessment of ten firms in 2015. The assessment asked how each firm was performing against its objectives on behaviour, competence and culture, with individual findings provided to and discussed with each board. As the first exercise this is of course only a static picture – a snapshot. It is, however, an important starting point. Over time the annual assessment cycle and the evidence it provides will enable us to build a dynamic, comparative picture of progress or emerging concerns at both a firm and sector level; to benchmark firms against the rest of the sector or a part of it and to provide guidance on best practice and approaches that can help raise standards across the industry.

The themes from the 2015 assessment, and issues that we will explore further, are:

  • purpose, values and culture: is a firm’s purpose understood and ‘owned’ across the organisation? Are purpose, values and culture fully aligned, or are there in practice tensions between any of these elements, especially in stressed or uncertain environments?
  • culture and compliance: how far does a firm’s strategy for managing culture go beyond managing compliance and conduct risk? Is it focused on avoiding misconduct costs, or does it look more broadly at what influences behaviour and motivation across the firm?
  • leadership and key person risk: strong leadership, and leadership by example, are key to a good organisational culture, but how does a firm ensure that momentum is not dependent on one individual? What is the role of the board in this, and of executive teams and middle managers?
  • incentive and reward structures and practices: are these aligned with the firm’s purpose, value and culture? What is the role of the Remuneration Committees in shaping culture? How does the firm manage the transition from sales targets, and manage any unintended consequences?
  • challenge and speaking up: to what extent does a firm create and foster an environment in which staff feel free to speak up if something isn’t right, or could be improved? What is the firm doing to encourage diversity of thought and experience within its workforce? How is this measured? and
  • the provision, take-up and effectiveness of staff training and support: how are training and development used in practice? Is this consistent with the firm’s objectives on culture? How is the impact of training on staff behaviour and competence, and ultimately on customer and client outcomes, measured? How does this inform future training?

These are all big issues, and each will require coherent and concerted effort to address. The challenges for some firms on some issues will be greater than others – every firm’s starting point is different – but the collective challenge for the sector is very large. Achieving it in a credible and sustainable way will be a long haul and a difficult one. But a start has been made.

The publication of this review is an opportunity to take stock of progress in our first year and to consider the implications of our pilot assessment for the approach we take with member firms in our second year and beyond. With our membership having opened at the start of 2016, it is also the right moment to report publicly on the work we have done and our priorities for the year ahead, and to invite challenge on and input to our efforts.

I am most grateful to all our Board members at the BSB for their many contributions to the Board’s work this past year. And I would also like to thank Alison Cottrell, our CEO, and the executive team, who have got us to this point in a remarkably short time.

Dame Colette Bowe, Chairman



The Banking Standards Board (BSB) is a small organisation with an ambitious remit: to help raise standards of behaviour and competence across the banking sector. As a non-statutory body working with the industry but not representing it, and with an expert and majority non-practitioner Board, it will develop and present an honest, impartial and evidence-based picture of culture, competence and behaviour in the banking sector. It will also help to change that picture, working both with individual member firms to assess how far they are meeting their objectives on culture, competence and behaviour, and with members collectively on professionalism, voluntary standards and the identification and dissemination of good practice and lessons learned from across and outside the UK banking industry.

Every bank or building society that joins the BSB is making a voluntary affirmation of its commitment to raising standards in the UK banking sector. This does not, of course, imply that all firms face the same challenges within their own organisation; each bank or building society will have its own culture, its own history, its own context and its own challenges.

Whatever their individual starting points, however, all member firms recognise a shared responsibility for managing the standing, reputation and trustworthiness of the sector; a collective trustworthiness that is not only important for customers, but that also has implications for the shape of regulation and the ability of the sector to attract talented people to work in it.

The BSB’s role is to help, support and challenge its members in meeting both their individual and their collective responsibilities for culture, behaviour and competence, and we are using a range of approaches to do this. Our annual assessment exercise asks how far a firm’s culture promotes desirable outcomes, what the board and the executive team are doing to achieve this, and how they know whether what they are doing is having any effect. In 2015 we piloted our approach with ten firms. This year we will build on and extend the exercise in a more systematic and comprehensive manner, and incorporate quantitative approaches that will begin to enable member firms to benchmark themselves against their peer group.

Alongside the assessment exercise, and working flexibly across firms and in collaboration with other organisations as appropriate, we are also focusing on promoting professionalism at all levels and in all parts of the sector; on exploring the relationship between law, regulation and ethics; on developing voluntary standards that will support a better service for customers; and on facilitating learning from within and outside the banking sector.

The BSB has come a long way very quickly since its launch in April 2015. It will maintain this momentum over the coming year, building on the work outlined in this first annual review to support and challenge the industry in its efforts to build trustworthiness and demonstrate credibly that it puts the interests of its customers and clients at the heart of its business. Only the industry itself can achieve this; not the BSB. It is no small task, and it will not happen overnight (or at all) without concerted and consistent effort; but it is an effort worth making. When staff working in banks and building societies across the UK can say not just that they are proud to work for their own firm (as many already are), but that they are proud to work in the banking sector, something will have changed.


Alison Cottrell, Chief Executive

This initiative is hugely important to the development of the whole of the banking industry. I have been very encouraged to see how quickly the BSB has got up and running and it is no surprise that the UK is now seen as out in front when it comes to non-regulatory moves to tackle behaviour, competence and culture.


The Banking Standards Board (BSB) is, as it publishes this first annual review, less than one year old. The factors that prompted its creation, however, date back to the financial crisis of 2008 and the failures of competence, behaviour, management and leadership – as well as breaches of the law – that were thereby exposed.

A succession of very serious issues in both retail and investment banking (including, but not confined to, the manipulation of the London inter-bank lending rate and foreign exchange benchmark rates, and the mis-selling of Payment Protection Insurance and interest rate hedging products) have damaged trust and confidence in the banking sector. While some of these practices stemmed from the period prior to the crisis, others occurred or continued well after it, notwithstanding conduct having risen up the agendas of bank boards and executive teams. The trust and confidence affected was that not only of customers, but also of taxpayers, regulators, public policy makers, investors and banking sector employees themselves. The challenge for the industry now is not to persuade its customers to trust it again; it is to demonstrate to these customers and to others that it is trustworthy.

Banking is not, of course, unique in having suffered a loss of trust in recent years, and examples of poor leadership and behaviour are not confined to the banking sector. Given, however, both the centrality of the banking industry to all our daily lives and the scale of the failures that occurred, the consequences of these breaches of trust were exceptionally damaging, costly and long-lasting.

A successful, dynamic UK economy needs a strong, stable banking sector that serves the best interests of its customers, both in the UK and globally. When confidence in the honesty, reliability and competence of the banking sector declines, the cost to individuals, society and the economy as a whole is very high; and while neither the crisis nor the breakdown of trust were confined to the UK, the relatively large size of the banking sector in the UK economy means that the ramifications of the crisis were felt (and continue to be felt) all the more strongly.

The events that precipitated and exacerbated the crisis have been extensively documented, in particular by the UK Parliamentary Commission on Banking Standards (PCBS). The PCBS recommended, in 2013:

“work to establish a professional body should begin immediately as a demonstration that commitment to high standards is expected throughout banking and that individuals are expected to abide by higher standards than those that can be enforced through regulation alone. . . . A unified professional body for banking should have no need of public subsidy, either directly or indirectly. We would expect such a body to be funded by participating banks and individual qualified members. However, it would also need to establish independence from the outset, through its forms of governance, its disciplinary procedures and through the personnel at senior levels. The body must never allow itself to become a cosy sinecure for retired bank chairmen and City grandees. Just as importantly, it must eschew from the outset and by dint of its constitution any role in advocacy for the interests of banks individually or collectively 1 .”

Following a careful examination of the options in his 2014 review of banking standards, Sir Richard Lambert concluded that there was ‘a strong case for a collective effort to raise standards of behaviour and competence in the banking sector, and that the best way to deliver this [was] by setting up a new and independent body to drive the process forward’ 2 . Membership of this new organisation would be open to firms – all banks and building societies in the UK – rather than to individual employees, though it would need to work closely with existing professional bodies. The Chairmen of six of the UK’s largest banks and its largest building society 3 agreed to underwrite this proposal and translate it into action.

The aim was to create an entity focused not on encouraging customers and others to trust the banking sector, but on raising the trustworthiness of banks; a proposition that places the onus to act on firms themselves (rather than on their customers), and that looks across the whole spectrum of competence, behaviour and culture.

The responsibility for a firm’s culture, behaviour and competence cannot be delegated by the firm to regulators or to anyone else; neither can it be confined within a firm to individual functions dealing with compliance, risk or human resources. It sits, first and foremost, with the board and the executive team. It is the boards of individual banks and building societies that take the decision about whether to join the BSB and publicly commit their firm to meeting this responsibility. The BSB’s remit is, in this context, to help, support and challenge these boards and their executive teams, providing evidence-based information drawn from both a firm and sector level, and facilitating and encouraging continuous improvement and higher standards across the industry.

The BSB’s Chairman, Dame Colette Bowe, was appointed by Bank of England Governor Mark Carney in November 2014 4 and its Board announced in April 2015. The new organisation opened its doors to membership across the bank and building society sector in January 2016.

The composition of the Board 5 reflects the BSB’s remit. While the organisation is paid for, quite appropriately, by member firms 6 , it exists to challenge the industry and raise standards across it. As such, the Board has a majority of members appointed from outside the industry and with the expertise to speak powerfully for the interests of those that the industry exists to serve. These nonpractitioner members provide an assurance of the independent and impartial nature of the BSB’s voice; one that will be used to speak about and with the industry, but not for it or on its behalf; the BSB has no lobbying mandate or capacity. The Board’s practitioner members, meanwhile, are drawn from across the banking spectrum (and include also an investor perspective) to bring experience and knowledge of the challenges faced by the industry, as well as a personal commitment to ensuring that the BSB fulfils its role of helping the sector improve standards.

The BSB is neither a trade association nor a regulator. It does not represent the industry, and it has no statutory powers. As a membership body, it takes the regulatory framework as a given and asks firms how they can not only meet the letter and the spirit of that framework, but also voluntarily go beyond it with respect to the wider issues of organisational culture that regulation either cannot, or is not best placed to, address.

As a private sector body with no statutory levers, powers of enforcement or lobbying mandate, the BSB has the flexibility to work across a sector that spans banks and building societies, foreign branches and subsidiaries, and retail and wholesale firms. We can, as appropriate, work efficiently and constructively with a range of organisations such as professional bodies, industry bodies, other industry organisations such as the Fixed Income, Currencies and Commodities Market Standards Board, academic institutions and professional networks. The BSB’s structure, our ability to utilise advice and input from all sources, and the expertise and experience of our Board, all equip us to work in a creative, effective and efficient way. We will avoid duplication of what is already being done well, whether within firms or by other bodies, but will step in to inform, facilitate, challenge or disrupt and (equally importantly) step back again, as appropriate.

BSB membership is open to all firms operating in the UK with a banking licence. Membership is voluntary. Firms that join the BSB are making a strong, positive and public affirmation – to their customers, members, staff, investors and society as a whole – of their commitment to achieving high standards of behaviour, competence and professionalism, both individually and across the whole of the banking and building society sector of which they are a part.

The individual challenges and starting points for each BSB member firm will vary. For some, the challenge may indeed be about changing and improving their corporate culture. For other firms, it may be about sustaining standards, traditions and values in the face of changes in technology, markets, customer preferences, demographics or other external factors. For others still, it may be about aligning local, national and global cultures, or creating the ‘right’ culture in a newly established firm (or not losing that culture as the firm expands). Some challenges may be common to a number of firms, or across firms of a certain size, business model or market; but for each firm, the combination of challenges it faces, and that its board and senior executive team need to manage, will be as individual as the firm itself.

Whatever their individual circumstances, all member firms in joining the BSB are making a commitment not only to challenging and continuously improving themselves, but also to improving the standing and trustworthiness of the sector as a whole. This will take time and effort on the part of the firms involved. The BSB cannot achieve this for the industry; it can and will, however, help firms committed to achieving it, to do so.

The way in which the BSB is approaching this task over the coming period is outlined in the next two sections of this report. Section 2 describes the pilot assessment undertaken with ten firms in 2015 and sets out the key themes and findings that emerged from this initial exercise. Section 3, drawing on and informed by the themes from the 2015 assessment, sets out the BSB’s priorities in 2016 and describes both the approach to the coming year’s assessment cycle and the BSB’s other work, including on professionalism.

  1. Changing Banking for Good, Vol 1, Summary, and Conclusions and recommendations (excerpts from paragraphs 94 and 96).
  3. Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander, Standard Chartered Bank
  5. See Annex for a list of Board members, or for further details
  6. Once completed, independently audited annual statements will be published on the BSB’s website.