03 August 2015

Reuters: Global finance leaders to banks: reform culture and conduct or face more regulation

The G30 said that efforts had been made to strengthen internal cultures, but many banks still need to implement reforms on compensation and the dismissal of employees – including top executives. In addition, the group argued for new approaches to hiring policies, and stronger roles by boards of directors to ensure cultural and conduct changes.

The report, the 'Banking Conduct and Culture: A Call for Sustained and Comprehensive Reform', says failure by banks to implement across-the-board cultural and conduct reforms could lead to still more regulatory rules and actions.

“Piecemeal approaches are not good enough. Aspirational leadership statements by bankers must be matched by effective and disciplined implementation programs,” said Jean-Claude Trichet, chairman of the G30 and former president of the European Central Bank. “Today, we are proposing comprehensive reforms in the approaches to bank culture and conduct that are both essential and urgent.”

Trichet added: “We know that there continue to be investigations of alleged wrong-doing by banks and that the pressures on official authorities to introduce new regulations will rise. Banks need to demonstrate the capacity to reform themselves.”

On the prospect of future regulation should bankers not heed to call for cultural reform, Sir David Walker, vice chairman of the G30 Steering Committee, said at a press conference on Thursday: “I think bankers and regulators alike do not believe that more regulation is the answer to the issues of culture and conduct . . . At the same time, we are aware that there is a probability that further acts of wrong-doing at some institutions will surface.”

“The alternative to action might be more regulation and this could have unintentional damaging consequences for the ability of the banking system to best serve the financial needs of the economy,” Walker added.

The 84-page report on banking culture, based on nearly 80 interviews with industry leaders, central bankers and other officials in 17 countries, highlighted six areas where banks should focus their attention.

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