Today (31 December 2015), BBC Business News published an article headlined ‘Banking culture inquiry shelved by regulator FCA’ highlighting the comments made by Mark Garnier MP on BBC Radio 4’s Today programme regarding the FCA shelving plans for an inquiry into the culture, pay and behaviour of staff in banking.

The tone of the comments were definitely ones of disapproval, along with the suggestion of conspiracy between the regulator and the Treasury. Mr Garnier said ‘…I think probably we're missing an opportunity to be able to look at what is best and worst practice across the banks.’ I think Mr Garnier should look at what has already been done and what is in the process of being done.

On 2 December 2015, Tracey McDermott, Acting Chief Executive of the FCA, delivered a speech at the City & Financial conference on Personal Accountability in the Financial Services Industry. The speech focussed on the introduction of the Senior Managers Regime, what prompted its introduction, the approach to implementation being taken by the regulator and its overall intent.

It is clear from Ms McDermott’s comments that the FCA has a reasonable understanding of the drivers behind the culture and behaviour of the regulator, Firms and individuals within the Financial Services industry leading up to, and since the financial crisis. She makes specific reference to the detailed forensic analysis of HBoS as providing ‘lessons learnt’.

In the context or Mr Garnier's 'disappointment' regarding the shelved plans, surely only so much value can be gained from a ‘drains up’ investigation into what went wrong. If the causes are already reasonably clear, then focussing on introducing the required changes and if necessary evolving those changes is more beneficial.

Ms McDermotts speech set out her views in terms of the:

• Spirit of the rules: the need for Firms to embrace the regime and capitalise on the opportunities it offers them. She discourages Firms from taking a ‘tick box’ compliance approach or exploiting loopholes in the regulation
• Taking ownership of the regime: the need for Firms to adopt the regime and implement it in a way that can streamline their structures, reinforce their values and both empower and inspire their staff.
• Certification: the need for Firms to take responsibility for ‘Fit and Proper’ assessment of their staff and deal with damaging behaviour openly rather than covertly.
• Get ready for March: the need for Firms to interpret and implement the new regulation in time for its introduction.

If you subscribe to the media view that banks are a greedy bunch whose sole purpose is to make money at all costs, then I am surprised you have read this far. If you start from a position of ‘not all is bad’ with the Financial Services industry, then, like me, you may have hope that SMR will be the catalyst that leads to positive cultural change in an industry that is crucial to our economy. From Ms McDermott's perspective:

‘Implementation of the SMR will be a massive test here – if embraced and embedded as an exemplar of good business – not as a compliance task – it has the capacity to lead to a sea change in how UK financial services is seen by all...

The prize for all of us will be a vibrant and innovative financial services sector, underpinned by a strong sense of accountability, that aims to build and maintain the trust and confidence of society, and is thus able to meet society’s needs.’

A full transcript of Tracey McDermott's speech can be found here.