Compliance doesn’t have to be the hardest word

Posted on 24/01/2018 in General

By Brendan Leddy, Head of Compliance, BACB

One of the biggest strengths of the British banking sector is the reputation of our regulatory framework. That our banks are held to the highest possible standards assures the international financial community that they can bank in Britain with confidence. Over the next few years, with the impact of Brexit, this reputation will be even more critical.

It’s the job of compliance professionals to understand this framework and pass that understanding on to all employees, to ensure that our institutions are adhering to it.

Until 2008 the tussle between regulation and business growth was constant and with the benefit of hindsight the financial crisis has shown us just how detrimental those competing priorities were. There were limited guidelines around remuneration and bonus packages; individuals were not held accountable for their actions and penalties were inadequate – so much so that in some cases unscrupulous banks simply factored in a few fines to their cost of business, to allow for the odd misfire of their high-risk strategies. In those days compliance was seen as something of a dirty word in the banking sector. A box ticking exercise at best, and something to be evaded at worst.  

We all know the impact of this approach. Financial leaders, focused on growth by any means, and emboldened by these high incentives, low personal responsibility and minimal risk, facilitated an aggressive, risk-taking culture at all levels of their organisations, where the only item of interest was the bottom line. This overstretched banks and the result was a crash whose reverberations are still being felt a decade later.

In the subsequent court cases, of which there were many, every individual who sat in the dock said, “the bank made me do it,” or, “it was just how things were done”. No one took responsibility, and individuals were hard to pinpoint. It was blamed on the culture of the industry.

It is this culture that the financial regulator has taken ambitious steps to counter since 2008. 

It can be hard to pinpoint what constitutes ‘good’ conduct and culture across a whole sector. While the regulator has identified ‘conduct risk’ as one of its top priorities for the industry, it hasn’t given hard and fast measures for financial institutions to follow.

What they have done is identify some areas of focus, which they themselves are implementing and to which they are challenging all organisations to step up. These include:

  • Tone from the top – understanding that the leadership team set the example and culture of a business
  • Personal responsibility – individuals at all levels holding accountability for the decisions they make and the way they do business
  • Strategy and culture alignment – ensuring that your business strategy doesn’t promote non-compliant behaviour or conflict with your values and culture

At BACB we believe that both as an organisation and as individuals, we have a responsibility to not just adhere to the regulatory framework, but to go beyond it, and take a leadership position in an industry that is still struggling to repair its reputation. This approach is what we have enshrined in our new code of conduct and culture, the BACB Way. We have already enacted our Code of Conduct Charter among our leadership team – committing them to walk the walk and talk the talk, and we are in the process of rolling this out to all staff, asking them for the same commitment.

My role and purpose as Head of Compliance is to show people how compliance enables our ambitions of honesty and transparency and supports the people in our business to do business the right way. It is also to translate the complex guidance and information from the regulator and to make sure that each individual within our business know about and understands what it entails.

Compliance is at the core of the BACB Way. As an industry, we never want to return to a world where people are incentivised to ignore the regulators for financial or personal gain. We are making compliance an enabler to business, and part of people's individual accountability with our Speak Up and Speak Out policy for anyone who observes behaviour within the bank that doesn't meet our high standards. 

It’s about ensuring that compliance isn’t just about partnering with senior management, or box-ticking, but about partnering with every person in the bank. We can help make people’s jobs easier, and protect them if things go wrong. If someone speaks up and speaks out they have insulated themselves from criticism and compliance can support them.

We are coming to the end of a challenging decade for banking, and we at BACB are determined to play our part ensuring that the culture which allowed the 2008 crash to happen is never repeated.

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