The FCA wants to see a cultural shift among firms similar to the change in public attitudes towards drink driving, says director of enforcement and financial crime Tracey McDermott.
Speaking at the FCA’s enforcement conference in London today, McDermott said drink driving was in the past avoided only through fear of being fined, but is now seen as a “moral issue”.
She said: “The cultural change we are looking for is perhaps analogous to the shift in attitudes to drink driving between my parents’ generation and my own.
“For my parents and their peers, reluctance to have a drink and get behind the wheel was mainly because they were scared of being caught. This was not seen as an ethical dilemma.
“For my generation, however, drinking and driving was presented as a moral issue. We were forced to focus on the impact it could have on others’ lives.
“So the interesting challenge is how do we move from needing ‘a cop on every corner’ to a world where people more often make the right decision instinctively because they believe that is what is valued by their peers, their colleagues and their firms and because they will be ostracised if they don’t.”
McDermott said in light of the £2bn forex fines imposed on banks last month, the industry is “some way short of the corner that needs to be turned”.
She said repeated failures undermine the reputations of both the FCA and regulated firms.
McDermott argued misconduct is not the result of rogue individuals but evidence of “deeper and wider” issues.
She told delegates: “While some individuals went too far they did not do so in a vacuum. The traders involved in these incidents knew what they were doing was wrong.
“ They did it because they operated in a culture in which they believed, at best, that poor behaviour would be excused by the results for the firm, and for them individually and, at worst, would be rewarded by the firm and their peers – in terms of both financial reward and status.”
McDermott said lessons are being learnt, “albeit slowly and from the top down”.
She said: “The trickle down from boardroom to trading desks and sales staff takes time.
“Unless this becomes part of the DNA of firms, unless the front line owns this change and buys into it, it won’t happen, no matter how many fine words there are from those at the top and no matter how many thousands of compliance staff you employ.”
She added that the FCA does not have targets for enforcement action: “I have heard some in the industry say that regulatory enforcement is like the Soviet tractor factory – that we are fulfilling some expectation that year on year more must be produced.
“But there is no such expectation, there are no such targets. We do not see enforcement as an end in itself. It is simply one of the tools the FCA has at its disposal to encourage better behaviour.”