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Knowing Your Culture – The C Word In Financial Firms

Culture in financial services firms is – if not exactly a buzzword – more of a concern to regulators today than some of the themes that have historically preoccupied them.

Hardly surprising, given numerous failures of culture stretching back to the 1980s when governments across the world started deregulating markets: financial crises, bank collapses, huge losses, taxpayer bailouts, corporate and individual misdemeanours – many helped along the way by severe problems in the culture of the failing firms.

I’m not going to use this blog to re-hash war stories that have already had ample publicity and coverage over the decades.

Instead I want to focus on what culture in financial services firms means, partly informed by my own experiences past and current. How do firms formulate and package their culture? Can the language that a firm uses in its external and internal communications provide any leading indicators of its culture?

Can stakeholders such as regulators, depositors, investors, employees and suppliers identify and recognise the underlying culture of a firm, in the absence of adverse – but lagging – indicators such as critical losses, collapse or regulatory failure? What signs or behaviours might be revealing of a shallow or expedient culture?

FRTB: Defining A Target Operating Model

The Fundamental Review of the Trading Book (FRTB) is still a long way away – January 2022 at the latest estimate. But the time will pass quickly. Banks with trading activities need to be planning towards it now or soon.

This blog is derived from a piece of work I did recently for a potential client. It suggests an approach to defining a Target Operating Model (TOM) for implementing the FRTB.

In truth this will be mainly of interest to banks which have not yet started their FRTB planning. For example subsidiaries, smaller banks, and banks with marginal trading activities but exceeding the de minimis exemptions.

Most large banks are well under way with FRTB implementation, and have been for some time, participating in industry groups, Basel Quantitative Impact Studies (QIS) and routine monitoring, getting buy-in from their business leaders, corporate program leaders and strategic IT planners.

But smaller banks, in my experience, are not. Understandably, they prefer to wait and see. There are no real advantages to being first movers in this initiative, which has already evolved far – though not beyond recognition – since 2012.

With so many uncertainties along the path, including Brexit and the strategic regulatory and policy intentions of the US Administration, being in mid-pack is a smart play.

Still, it is worth having a long-term think ahead about how you might eventually implement these rules if you haven’t already.

*** Note: This blog does not constitute advice, but please contact Prism-Clarity for further information, including where to get the best advice. ***

BOEPrism

Risk & Regulation Round-up January to April 2018

This is the latest round-up in the series covering key announcements and developments in UK financial risk and regulation. I take my usual summarised and simplified approach to the main stories, but as always the regulators have been very busy.

A significant development for some of my clients and readers was the announcement by the Basel Committee of key changes to the Fundamental Review of the Trading Book (FRTB), the proposed revamp of the rules on market risk capitalisation of the trading book, which have been in development and consultation for some years: now due for implementation in 2022. See section 1.

Elsewhere, Fintech planning loomed large in the minds of regulatory and government agencies, especially but not only the European supervisory bodies. In similar vein but more broadly, Bank of England Governor Mark Carney made a thoughtful speech on the future of money in the light of the crypto-currency revolution. See section 2.

The topics mentioned here are just key highlights – see the detailed sections for more stories. See individual articles in this blog for links to underlying source stories or documents.

*** Note: The articles in this blog do not constitute advice, but please contact Prism-Clarity for further information, including where to get the best advice. ***

BOEPrism

Risk & Regulation Round-up October to December 2017

This is the latest round-up in the series covering key announcements and developments in UK financial risk and regulation.

As usual I adopt a summarised and simplified approach to the main stories. Links to underlying source stories or documents are contained in individual articles in this blog.

Substantive guidance is now starting to emerge from the regulators on Brexit; in particular the need for some firms to apply for relevant authorisations to do business in the UK post-Brexit, irrespective of the likely implementation period and temporary permissions regime. See section 1 below.

A major regulatory announcement came in December from the Basel Committee: the final set of revisions to the Basel III capital rules. These included confirmation of the new capital floor, delays to the implementation timeline and other changes. See section 2 below.

*** Note: The articles in this blog do not constitute advice, but please contact Prism-Clarity for further information, including where to get the best advice. ***