Greg Medcraft, chairman of the Australian Securities and Investments Commission (ASIC) has publicly spoken on the importance of corporate culture in improving governance and compliance.
The industry is paying attention. Culture is one of four key streams to feature at Sibos, a leading annual event for the banking industry hosted by SWIFT – the international payments network. One session features the learnings from the Dutch central bank, De Nederlandsche Bank, which has identified and assessed risks in relation to culture and behaviour and how to mitigate them.
Mitigation is one thing but issues can still make front-page news even when they don’t represent the culture of the organisation as a whole. Most people go to work every day wanting to do the right thing and no matter how hard you work on it, a bank’s brand can still suffer because of the bad behaviour of a handful – out of thousands – of people.
Most bank employees want to play a role in supporting a strong financial system built on ethical behaviour and fair outcomes for customers but there will always be exceptions.
Our industry has become tarnished by the handful, the tiny minority, and if we continue to allow our industry to be marked down we won’t be able to attract talent to work in banks. Nor will we alleviate concerns conduct issues are not just a minority of individuals but represent a more pervasive industry culture.
However, addressing culture is easier said than done. Even when it comes to doing the right thing, for international banks there are challenges in taking a single view of what that actually means. The right thing for someone in Australia might not be the right thing for someone elsewhere.
Take a market in the Pacific as an example, where it is a cultural norm to tip a teller for good service, something not acceptable in Australia. It is challenging to get a clear message out to all the countries in a way that takes account of these cultural differences and does so respectfully.
Also, the lines are often blurred between culture and risk culture. Risk culture is a subset of the bank’s overarching culture and conduct risk is a subset of that – they are not mutually exclusive, and each builds on the other.
For example, we can have a culture of innovation but how do we innovate and be quick to market in a risk averse way? It’s not just about being innovative and the first to market, we also need to respect our customers at the same time. From a conduct perspective we need to be innovative with solutions while still ensuring obligations designed to protect customers are met.