Speech to the Eversheds Sutherland Conference on Culture: Leadership, Accountability and Culture in Financial Services

14th November, 2018

I’d like to thank Eversheds Sutherland for inviting me here this morning, and in particular Ciaran Walker for moderating this event.

I know some of you heard me speak on this subject in Trinity a few weeks ago and you may be familiar with some of the points that I previously made. 

However, these points bear repeating as they are vital elements of the dialogue necessary to drive cultural change within the financial sector.

I would like to assure you that I, and my colleagues in Government, are supportive of measures to change behaviour, operations and organisational culture within the financial sector, in order to keep the customer at the heart of its operations.

The culture review has been described as a watershed moment for Irish banks.

It comes at a time when culture is to the fore of the international discussion on banking practices, as illustrated by the roll-out of senior manager regimes right across developed financial systems.

As I said before, the true test of whether this is a turning point for Irish banks, and the financial services industry more widely, will be if we find ourselves with firms who truly do consider the impact of their business decisions on individuals, the economy and society as a whole.

Getting to that point is what requires a seismic cultural shift. 



The culture of any organisation encompasses the collective values, beliefs and behaviours of its members, which contribute to its unique social and psychological environment.

Because culture is not just the procedures set out by management, or the laws that a business must follow, but is made up of the choices that each individual makes, it presents a difficulty for regulators and policy makers: changing culture is not as easy as simply changing the rules.  

Nonetheless, we have an opportunity to bring about real change in the financial services industry – changes that are not reactionary, but proactive and carefully considered.

There are many good examples of what organisational culture means.

For example Herb Kelleher, founder of Southwest Airlines, offers the straightforward definition that culture is what people do when no one is watching.

Kelleher further elaborates on how his company achieves its goals of good organisational culture by ensuring that employees are put first.


He says: 

‘If you truly treat your employees that way, they will treat your customers well, your customers will come back, and that’s what makes your shareholders happy. So there is no constituency at war with any other constituency. Ultimately, it’s shareholder value that you’re producing’.

At last month’s Central Bank conference in Trinity College, business leaders shared their experiences of working within frameworks of accountability and responsibility in other countries.

Their central message was clear – while leading change in cultural attitudes starts from the top down, we need to start talking to each other and learning from each other at all levels to achieve the goal of cultural change that we are striving for.

Ethical behaviour must be fostered from the top by the board of directors and senior management team, in what they do, say and by the examples they set.

Living examples of ethical principles by leaders will send a clear message that the organisational expectation is that good ethics must prevail to allow good business with a firm focus on consumer protection to flourish. 

The opinion of the Central Bank in its report that ‘banks undertaking comprehensive organisational transformations (…) should place an emphasis on inclusive and collaborative leadership styles, aimed at integrating as many people and perspectives as possible’ lends itself to that same message. 

The UK Financial Conduct Authority has some good practical examples of best practise and it is this that I am speaking about when I say we can learn from others in order to achieve the desired goal of good cultural environment that will benefit everyone.

I mentioned that I had taken time to reflect on the findings of the Culture Report; I am also taking time to consider how legislation can be used to best effect.

I am determined to adopt such a strategic approach in proposing and bringing through legislation that allows the Central Bank and firms within the financial sector to drive the necessary changes in culture. 

My officials and I will systematically work on these proposals, as opposed to adopting a short term crisis response.


Government Objective

The Government’s objective is a sustainable financial services industry, with rewards reaped over the long-term for customers, staff, and shareholders. It is one where consideration of the impact on individuals, the economy and society as a whole is firmly embedded in organisational culture.

In changing to a culture more focused on individuals, the economy and society, we need to properly reflect the Latin origins of the word ‘culture’ – to tend to, to grow, to nurture – by cultivating new norms within the financial sector, as opposed to merely transplanting another set of rules.

Our study of political philosophy points to the importance of statute in creating the social norms which influence our everyday actions as citizens. 

This wider societal norm applies equally within individual firms. 

I was particularly struck by Derville’s previous citing of research which demonstrates that there is not a random spread of bad behaviour within the financial sector but that it is concentrated in certain banks and firms. 

This demonstrates the need for common conduct standards throughout the banking sector to ensure fair treatment of customers and to ensure a level playing field for competition within the sector.

As I’ve previously stated, I intend to seek Government approval for a Central Bank Amendment Bill in early 2019.

In drafting the proposed legislation, my officials have been undertaking detailed analysis of how best to further enhance the regulatory and enforcement powers of the Central Bank.

My Department is engaging with the Central Bank and other stakeholders, while also evaluating best practice, including lessons from the UK’s experiences, in order to ensure that the legislation addresses the recognised failings set out by the Culture Report, while also being fit for purpose.


The Principle of Trust

Historically the core principle at the heart of the banking sector has been ‘trust’.  This principle of trust was at the core of the Florentine banking system in the 14th Century, prior to the existence of legally enforceable regulation. 

For the centuries since, trust has been at the core of banks’ operations. 

I was particularly struck by Baroness Onora O’Neill’s comments at the Trinity conference when she stated that honesty and competency lead to trust. 

The sector as a whole now needs to convince wider society that it can be trusted again so it can avail of its ‘social license to operate’. 

Unfortunately in Ireland the bond of trust between banks and their stakeholders has been sundered.

The deep generational impacts of our financial crisis have left ordinary citizens suspicious of banks and bankers.

So trust needs to be restored at all levels of Irish banking.

Perhaps the definitive work on this subject is Francis Fukuyama’s ‘Trust’, published in 1995.


Fresh from predicting the ‘End of History’, he sought to establish the key factors that influence economic and social prosperity.

He concludes that the social virtue of trust is foundational.

Fukuyama views modern institutions as a necessary but not sufficient condition for prosperity and the social well-being it underpins in advanced societies.

For such societies to truly flourish, institutions need to be combined with certain communal social and ethical habits, of which social trust is the most fundamental.

His argument is particularly prescient in our present time as he warns that ‘we cannot take these older ethical habits for granted’.


Legislative change

In bringing forward legislation on foot of the Central Bank’s proposals and particularly when working with my colleague, the Attorney General, there three key tests I will apply.

First, is the legislative intervention appropriate?

At the Trinity conference, Professor Marco Lamandini caused us to ponder on the fact that the intensity of regulation can exempt people from thinking that they should act properly and in the best interests of customers.

Second, will it be proportionate?

It is crucial that any new accountability regime applies fairly to different staff within the bank and wider sector in terms of reflecting the importance and significance of their respective roles within their firm and the sector as a whole.

Finally, any such legislation must be effective.

There will be a cost to this regulation. Are the improvements worth it? We must be particularly cautious that we don’t drive consumers into lesser regulated sectors where costs are lower because of this, thereby putting them in an inferior position.

These considerations must be carefully adhered to in advancing the culture proposals that are robust and not open to challenge. 


Key themes

I previously articulated the key principles which I believe changes should focus on in order to impact banking culture. These are:

  • Responsibility;
  • Accountability; and,
  • Diversity 

These three principles set out many steps, which I will further elaborate on.


Responsibility should exist at both a personal and organisational level.   

At the personal level, individuals must be empowered to speak up – within their own organisations, and to the Central Bank in cases where it is a regulatory matter. 

The Central Bank’s proposals for common conduct standards could, if legally possible, play an important role in empowering bank employees to speak up by making it a requirement for them to do so when they witness wrongdoing.


It is also in the industry’s long-term interests to have people at all levels taking responsibility:  whether that be the branch official taking responsibility for providing the customer with the most appropriate product, to the senior manager taking responsibility for innovations that improve the bank’s wider product offering to customers.



Accountability means not only being responsible for something but also ultimately being answerable for one’s actions.   

A great deal of work has gone into making non-executive directors accountable for their actions, now this needs to be carried through to the executives, making senior management and middle management accountable for their decisions.

At the organisational level, responsibilities should be clearly defined and ownership taken. 

If the sector is to advance, it is vital that those working within it are willing to innovate, and fail, while taking all of the reasonable steps to manage the associated risk.   

This regime should be designed to call to account those taking unnecessary, uncalculated risks; who engage in moral hazard, who refuse to follow the correct protocols and processes, who lie to or mislead their colleagues and clients, and who knowingly commit wrongdoing.

It is for the protection of firms’ own reputations and the industry as a whole.

This regime should not be about taking action against any individual who has taken all the steps, caution and due diligence that could be reasonably expected, and is acting in good faith.


Most importantly, it is clear that changes need to be made to foster diversity and inclusion in the banking and financial services sector.

When we are cultivating the ‘right’ type of culture in banks, it must be one that is reflective of the broad spectrum of our society.

The Culture Report found that the banks have much more work to do in terms of ensuring their organisations are sufficiently diverse and inclusive, particularly at senior level. 

I am aware that this is challenging given the stringent regulatory requirements for suitably qualified individuals.

Without diversity – of experience, perception, and thought – firms will be unable to prevent group-think, guard against over-confidence or promote internal challenge; all characteristics that were seen in banking in the lead-up to the financial crisis.

Some banks are taking the lead by publically setting themselves diversity targets, which is to be applauded.  

These efforts need to be expanded and continually built upon.


Practical Implementation

The practical implementation of these measures will play a vital role in determining whether culture changes or not.

I will await the Central Bank’s recommended approach but the following broad thrust would appear to have merit:


A phased introduction – over time and across financial sectors. 

In speaking I have focused on the banking sector but I see the logic in extending some of the Central Bank’s proposals to other financial sectors. 


A consultative approach – hearing from all sides so as to identify potential unintended consequences.

Industry should engage with the Central Bank and my Department at an early stage to ensure that any valid and reasonable concerns about the regulatory changes are addressed.


Clear guidance from the regulator – however, this can only be guidance as the very spirit of changing culture is to foster a different and better approach, and firms must take the initiative to improve themselves.

Any new regulatory regime must be practicable and proportionate; here we can learn from the UK’s experiences with implementing a Senior Manager’s regime, what they found works and what doesn’t.


But again let me reiterate, the changes required here cannot be outsourced for a quick solution.

We can find and learn from examples of best practice, but at the end of the day firms must put in the work themselves.

On a practical level, my officials are working on what is legally and constitutionally possible with the assistance of the Attorney General and his Office.

The steps that industry are taking from their own initiative are also to be welcomed. I am pleased to note the launch of the public consultation by the Irish Banking Culture Board Establishment Office.

However, it is vital that we recognise that industry initiatives are not a substitute for regulation and will not supplant the proposed regulatory changes already in train.


Closing Remarks


There are challenges here for the Central Bank, for Government, and for industry.

I have said that the true test of whether this is a turning point for Irish banks will be if we find ourselves with firms who truly consider the impact of their business decisions on individuals, the economy and society as a whole. Working together, I believe we can achieve it.  

Thank you very much for your attention.