The FCA’s expectations around culture in financial services firms
The FCA’s expectations around culture in financial services firms

The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • The FCA’s expectations around culture in financial services firms
  • Why is culture high on the regulatory agenda?
  • The role of the SM&CR in improving firm culture
  • The FCA’s definition of a ‘positive culture’
  • The FCA’s approach to regulating culture
  • The drivers of a healthy culture
  • Embedding a healthy culture
  • Changes to come: Evolution of the FCA’s approach to ‘healthy culture’
  • Measuring change

Firm’s culture and governance is a key cross-sector regulatory priority. By focusing on firm culture, on individual accountability and minimum standards of conduct through the Senior Managers and Certification Regime (SM&CR), and on consumer outcomes, the Financial Conduct Authority (FCA) aims to prevent the risk of wholesale and retail misconduct and thereby improve trust in financial services. In its Business Plan 2019/2020, the FCA states that it expects firms to demonstrate awareness of the FCA’s expectations on culture, reflect this in their practices, and make specific improvements where the FCA identifies shortcomings.

Through speeches and publications, the FCA, along with certain regulators internationally and industry bodies like the Financial Stability Board (FSB) and the Financial Reporting Council (FRC), have put firms on notice that the process of assessing, managing and improving culture, and corresponding governance, is a key focus. The importance of a firm's purpose, leadership, accountability, capabilities and incentives in driving a healthy culture are at the top of the regulatory agenda. Further, the FCA has reiterated that these drivers should ensure a firm’s culture goes beyond technical compliance to a culture of ‘ethical compliance’, with a strategy which extends beyond the interests of traditional stakeholders to serve consumers and markets.

The process of embedding such a culture within firms is an FCA cross-sector supervisory and enforcement priority. Lead responsibility for