May 9, 2017 / 6:18 PM / 3 years ago

Top U.S. regulator looks abroad for measurement tools on conduct, culture battle

NEW YORK (Thomson Reuters Regulatory Intelligence) - U.S. regulatory efforts to tackle misconduct and reform bank culture have taken on an international dimension, with some senior officials actively engaging their foreign counterparts to better understand what works, what doesn’t work, and what might be applied at home.

The Japanese archipelago is pictured on a globe atop debris in the tsunami-hit Okawa Elementary School in Ishinomaki, Miyagi Prefecture, northeastern Japan.

“We are talking a lot (to foreign regulators) and experimenting to see what works,” said Michael Held, executive vice president and general counsel at the Federal Reserve Bank of New York.

Speaking at a Thomson Reuters conference on bank culture reform last week, Held said there was interest in industry-led initiatives like those developed under the Banking Standards Board, published for the second time last month (here). The survey, which covers approximately 82,000 bankers at 22,000 institutions, doesn’t measure or rank "culture," but rather asks how firms demonstrate the types of characteristics – openness, accountability, honesty, for example -- that would be associated with any good culture.

Some of the findings from the 2016 report show that more than four in five employees surveyed across all firms find their firms’ values to be meaningful, and many focus group participants said that they understood and appreciated the purpose and values of their firm. However, only 65 percent of employees agree that there is no conflict between their firm’s stated values and the way that the firm does business. In addition, 14 percent do see such a conflict, with this being more marked in systemically important institutions.

Held said it was important that such industry measures of culture should be led by banks themselves, as is the case with BSB survey.

“Similarly, if it were to happen in the United States it should be grown from the banks,” he told the audience, many of whom were in compliance and risk management roles at large U.S. banks. “We are trying to figure out what works, to figure out how to measure culture, to figure out what they are interested in and work it from there.”

Held added there was also interest by the New York Fed on how regulators at the Hong Kong Monetary Authority (HKMA) and in Australia were measuring culture.

“Both at the HKMA and in Australia, they are in some ways emulating the UK regulators in thinking about something that is akin to a senior managers regime,” said Held.

The effort by the New York Fed to engage foreign regulators was not lost among senior bankers participating in the panel discussion, some of whom see such collaboration ultimately helping banks in designing their own conduct and culture programs.

“It’s very useful that regulators are talking to each other because there are consistent themes that are helpful for us as we in the industry get together and talk about how to develop our programs,” said Emma Bredin, Managing Director and Global Head of Enterprise Compliance Risk Management at Citigroup.


A key themes at the conference was how banks were using various tools to measure the effectiveness of their conduct and culture programs. Compared to the environment three years ago, when New York Fed president William Dudley put cultural reform high on the regulatory agenda, participants said there was significant progress made in monitoring and measuring cultural reform.

“We’ve learned that you can measure culture. And that’s important because if you can measure it, you can monitor it, you can understand it, and you can manage it,” said Thomas Baxter, former general counsel at the New York Fed and now Of Counsel at the law firm Sullivan & Cromwell.

Baxter also pointed to the BSB’s recent results as an example of how industry can come together in a collective way to better understand whether progress was being made in managing conduct, a key element in an organization’s cultural makeup.

“The relationship between culture and conduct I think has been established,” said Baxter. “I think that certain types of culture can help facilitate the pursuit of certain types of strategies. And then the other relationship that is important relates to leadership.”

“You can’t in my view be a good leader unless you understand the culture of the organization that you are within, and also the relationship between culture and strategy,” Baxter said.

Other participants on the panel said their firms were employing both internal employee and external industry surveys to gauge the effectiveness of their culture programs. Some firms were also experimenting with internal employee monitoring tools and leveraging the data in order to predict possible future misconduct.

(Henry Engler is a North American Regulatory Intelligence Editor for Thomson Reuters Regulatory Intelligence. He is a former financial industry compliance consultant and executive, and earlier served as a financial journalist with Reuters. Email Henry at

This article was produced by Thomson Reuters Regulatory Intelligence and initially posted on May. 4. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters

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