Since the subprime mortgage crisis of 2007 and the ensuing global financial crisis, the image of the global banking sector has suffered. From the Wells Fargo phoney accounts scandal in the US to Deutsche Bank’s mortgage-backed securities misconduct in Germany to the ongoing payment protection insurance (PPI) scandal that has so far seen UK banks make over £24 billion (HK$232 billion) in compensation payments, consumer confidence across the board has been rocked.
Meanwhile, the banking sector faces a number of other challenges over the coming years. Innovations in financial technology, or fintech, are transforming the face of the industry. Changes in the labour market will result in banks having to adapt dynamically to attract talent. Legal and regulatory pressures mean an increasing amount of oversight must be implemented to ensure the mistakes of the past are not repeated.
All these factors are prompting the banking industry to reassess its internal cultures so as to prevent ethical lapses and win the trust of customers. Speaking at a conference in New York in October 2016 on the reform of bank culture, Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA), outlined the measures the authority is taking to improve Hong Kong’s banking culture. He defined the measures as “a set of ethical values jointly pursued and observed by bank shareholders, board members and staff”. He added that while good corporate culture and ethics ought to be self-driven and adopted from top to bottom, without any external regulatory pressure, many financial institutions have gone astray “in the pursuit of profits”.
Chan explained that an overhaul of the incentive system in banking would also be needed to engineer any cultural change, noting that a system that puts maximising profit as the only goal will fail to engender a “customer-centric culture”. A shift in priorities on incentives, he said, would help work towards this, while oversight for a revised incentive system should be provided by a remuneration committee chaired by an independent non-executive director (INED).
The HKMA, with help from The Hong Kong Institute of Bankers (HKIB), is supporting the development and empowerment of INEDs by organising training programmes and exchange sessions. The ultimate aim is getting banks to promote governance and risk management standards with “self-discipline and self-initiation”, Chan said. He acknowledged, however, that reforming culture would not happen overnight and that some co-operation with regulators would be needed.
There have already been moves towards a unified ethics standard in Hong Kong, with the HKMA, the Hong Kong Association of Banks and the DTC Association collaborating to issue a revised Code of Banking Practice in February 2015. HKIB is also playing its part, with CEO Carrie Leung explaining the importance of training and development in driving cultural shifts.
“Organisational cultural change is not an easy task,” Leung said. “The two most important elements for creating organisational cultural change are executive support and training. Value-based training, for example, helps banking practitioners understand clearly what is expected of them and know how to initiate new behaviours. In addition, effective communication, a review of work systems and structural organisational changes help facilitate behavioural change.”
Leung added that some people assume only frontline banking staff, managers, and consultants who provide customer services should be responsible for improving the industry’s ethical standards. “The truth is it concerns all banking staff, regardless of job positions and experience,” she said. “All of us involved in the financial services sector are going to be part of this ‘cultural change’.”
The HKIB’s recently launched Certified Banker, or CB, qualification – the new common benchmark for professional standards in the Hong Kong banking industry – goes some way to addressing this cultural change. In addition to subjects focusing on industry knowledge and technical items, CB also covers the area of professional ethics. This new qualification programme aligns itself to the Enhanced Competency Framework (ECF) being developed by the HKMA for important areas and functions of the banking and financial services industry. Applications to study for the qualification opened in January.
The awards and designations linked to the CB qualification are in three main stages. Completion of the Advanced Diploma for Certified Banker, together with one year of banking or finance-related working experience, awards the CB (Stage I) designation. Completion of the Professional Diploma for Certified Banker, with two years of banking or finance-related working experience, awards the CB (Stage II) designation. Finally, completion of the Postgraduate Diploma for Certified Banker, together with three years of banking or finance-related working experience, is recognised with the Certified Banker designation.
Leung added that to drive a comprehensive, industry-wide cultural change would require the allocation of training and resources to implement the strategy, emphasising that actively raising staff expertise would lead to better corporate culture and eliminate the risk of staff misconduct.
“Amid significant global banking reforms, investing in human capital is key,” she stressed. “In Hong Kong, banks need to make this a priority, or else regional competitors will step in.”
HKIB Certified Banker Qualification
Introductory session:
February 24, 6.45pm-7.15pm
Application deadlines:
CB (Stage I): February 20
CB (Stage II): March 13
CB: March 13
Enquiries:
Tel: 2153 7877 / 2153 7865
Email: programme@hkib.org
