2016 was a landmark year for the Banking Standards Board (BSB); one in which we opened for membership, undertook significant pieces of policy work, designed and carried out our first annual Assessment, and collaborated with a wide range of organisations in the UK and internationally.
This Annual Review provides an overview of our work to date, sets out our priorities for the coming year and reports publicly on the overall outcomes of the 2016 Assessment. The boards of the 22 member banks and building societies that took part in the Assessment have received their individual reports, and these are being discussed with each firm.
The BSB Assessment exercise does not measure or rank ‘culture’. It asks instead how far a firm demonstrates characteristics (honesty, respect, openness, accountability, competence, reliability, responsiveness, personal and organisational resilience, and shared purpose) that we would expect to be associated with any good culture in banking, and examines this both within a firm and relative to other firms.
This Review draws on the Assessment evidence to make a number of general observations about banking sector firms. Perhaps the most striking aspect of the results is, however, the degree of variation among firms.
For any statement made about firms as a whole, there will be some firms for which it will be either overly positive or unduly negative, and neither end of the spectrum is the prerogative of any one type of firm or business model. To state the obvious (but an ‘obvious’ supported by our evidence); all banks and building societies are not the same. The sector contains, as very often do firms themselves, examples of both poor and good practice. Being of a particular size, type or business model neither guarantees a good culture nor provides an excuse for failing to achieve a better one.
As the 2016 BSB Survey was the first of its kind, its results cannot tell us anything about the direction or pace of change. While we are aware of the efforts being made by many member firms, we have not therefore commented in this report on progress over the year. Our findings do, however, provide the baseline against which change can be measured in 2017.
That many firms in the banking sector are committed to achieving and maintaining high standards of behaviour and competence is clear, not only from our work but from the existence of the BSB itself. BSB membership is not an easy option. It demands a readiness on the part of boards and executive teams to ask questions of themselves and their employees that may result in uncomfortable or unexpected answers.
These answers showed, in 2016, both strengths and areas in need of improvement within and across firms.
Informed by the Assessment results, and taking into account also the BSB’s remit and its facilitative, impartial and non-regulatory role, our work over the coming year will be shaped around three themes:
- understanding and helping to address an apparent mismatch in many firms between the values espoused by the firm and the way that some employees see business being done;
- helping to develop a culture within the banking sector of responsibility and accountability rather than of blame. Good customer and client service requires a culture in which poor performance and behaviour have consequences, certainly; but it also requires one in which mistakes are learned from, ideas encouraged, professionalism prized and a diversity of views valued and fostered; and
- identifying practical steps to help promote personal resilience and well-being among employees, so that employees working in UK banks and building societies are able to serve their customers and clients well.
In exploring these issues the BSB will not only lead work but also, as appropriate, support or partner with organisations sharing similar or complementary aims, including in other jurisdictions and outside the banking sector.
We will also build on two areas of work initiated in 2016 around professionalism, and therefore of particular relevance to the second of our themes.
First, and following publication of our Statement of Good Practice on assessing fitness and propriety under the new Certification Regime, we will develop additional guidance on both Certification and Regulatory References.
Second, we will explore further the role of professional bodies and professional qualifications in banking, working with both firms and professional bodies through a new Professionalism Forum to be chaired by Sir Brendan Barber.
The commitment of employees at all levels in banks and building societies to serving their customers, members and clients is clear. Equally clear, however, is that the sector has a considerable way to go in demonstrating consistently the honesty, reliability and competence that BSB Board member Professor Onora O’Neill has described as constituting ‘trustworthiness’. Raising standards of behaviour and competence across the sector – and not being satisfied simply with tackling poor practice, but drawing on good practice to aim higher still – will require consistent, concerted and genuine effort.
The BSB will not itself raise standards in the banking sector. Only banks and building societies can do that. In providing impartial evidence and challenge, identifying good practice and facilitating learning from other sectors, the BSB can however help firms that are committed to managing their cultures, do better what they say they want to do.
The challenge of creating or maintaining a good organisational culture is not unique to banking, or indeed to the UK or the 21st century. The consequences of a poor culture in banking are however extraordinarily far-reaching, affecting the economy and society as a whole. For the UK banking sector, raising standards of behaviour and competence is not simply a challenge; it is a responsibility, and one that needs to be owned by every bank and building society today.