Bank culture: It's about more than bad apples

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November 2015


The Federal Reserve (Fed) again expressed concerns about the culture at financial institutions during its culture workshop this month. This theme has been recurring since the financial crisis, as regulators in the US and abroad have hit industry players with steep fines for employee misconduct.

EU and UK regulators have been the most active globally in pushing banks to address their culture weaknesses, enacting new rules limiting bonuses paid to senior employees that are in risk taking roles. The UK has also introduced a Senior Managers Regime establishing requirements for firms to certify that their employees are “fit and proper” to perform their jobs.

US regulators have not adopted such prescriptive approaches, and we doubt they will. Rather, the US will likely address culture through the supervisory process and continue to focus on firms’ risk appetite setting to address all elements of risk taking. Furthermore, the Fed will eventually re-propose its compensation rule from 2011, which we believe will encourage clawback measures, longer deferral periods, and bonuses that include company bonds (in lieu of equity).

This A closer look outlines (a) where banks currently are in improving their culture, (b) why culture change is so important, and (c) key steps banks can begin taking now.

Contact us

Dan Ryan

Banking and Capital Markets Leader, PwC US

Tel: +1 (646) 471 8488

Alison Gilmore

Asset and Wealth Management Marketing Leader, PwC US

Tel: +1 (646) 471 0588

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