Speaker: Emily Shepperd, chief operating officer   
Event: 10th Annual Culture and Conduct in Financial Services Summit 
Delivered: 4 February 2025   

Highlights

• Culture drives conduct and decision-making, which directly impact outcomes for consumers, markets, and our economy. For this reason, culture will continue to be a regulatory concern.
• It is vital that the informed, responsible risk-taking required for long-term economic growth is built on a strong foundation of healthy firm cultures.
• The FCA is actively working with stakeholders to drive up culture and conduct standards.

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February can feel like a long, hard slog; all dark mornings and dodging people’s coughs and colds. 

A timely reminder for us all of just how easily things spread.  

Like a winter bug making its rounds, culture can move quickly from person to person, meeting to meeting, decision to decision.  

A smile, a supportive comment, a listening ear – these things spread fast, creating an atmosphere where people feel valued, engaged and empowered in their work. 

But poor culture spreads just as quickly.  

A careless comment, raised voice or silence in the face of wrongdoing can infect whole teams and threaten the health of an entire organisation.

Good or bad, culture is contagious.

Why culture matters: conduct, confidence and resilience

More than once, I have been asked: ‘Emily, why does the FCA care about culture?’  

The answer is simple. 

As a conduct regulator, the FCA’s objectives are to protect consumers, ensure market integrity, and support the UK’s economic growth and competitiveness.

But time and again, when we investigate failures of consumer protection or market conduct, what do we find? 

The same root cause: failings in culture and governance.  

That is no coincidence. Because it is culture that drives conduct. Culture that shapes decisions and actions at every level. 

And those decisions, whether they’re made on the trading floor or in the boardroom, directly impact outcomes for consumers, markets and our economy.

Healthy culture for healthy growth

Which brings me on to economic growth.  

The Government has been clear that growth is its number one mission. And the FCA has been clear that’s a mission we support.  

The financial services sector has a key role to play… in growing our own sector – which contributes considerably to the national economy – yes. But more importantly, in providing the capital flows that can drive growth right across the real economy – ensuring the public shares in the success that only our sector can deliver.

Genuine, inclusive growth.

But growth does not come from standing still. It will involve taking on greater risk: asking questions, making decisive trade-offs, taking action.

There is no getting away from this fact, and as a society, we must now build consensus on what that looks like in practice.

The FCA has deliberately tried to shift the conversation around risk – encouraging more open discussion about the nature of those risks, who should bear them, and just what level of risk we are willing to allow into the system.

The conversation is evolving, but what is absolutely clear, is that the risk-taking required for long-term growth will be reliant on a foundation of healthy firm cultures.

Strong, inclusive cultures where diverse perspectives prevent groupthink and support better decision-making. 

So that when risks are taken, they are thoughtful and calculated.

I was interested to read about Google’s study ‘Project Aristotle[1]’, which looked into what makes teams successful.

The findings showed that technical expertise and individual talent were not the defining factors of high-performing teams, as many had expected.

The most critical ingredient was actually psychological safety. 

Teams where people felt safe to speak up, challenge ideas and admit mistakes, outperformed those that didn’t.

The lesson for our financial services sector is clear: cultures that encourage open dialogue, constructive challenge and learning from failure, fuel innovation, agility and longer-term success.

Toxic culture

One of the clearest warning signs of a failing culture is non-financial misconduct. Behaviours like bullying, harassment and discrimination.

An FCA survey[2] found that across around 1000 wholesale financial firms, there were 2347 allegations of non-financial misconduct in 2023. 

That’s about 9 per day – and those are just the incidents that were reported.

Many of you will have heard horror stories of firms where this behaviour goes on, unaddressed. Some of you may even have had the misfortune of witnessing it first-hand.  

The easy answer is to dismiss incidents as isolated, individual failings. And it is true that the odd bad apple will crop up from time to time. That’s life.

But it’s how these behaviours are dealt with – or not dealt with – that makes the difference.

These days, online platforms allow prospective recruits to see beyond glossy PR to the reality of an organisation before they sign on the dotted line. 

And who wants to join an organisation rife with bullying or discrimination?

If a firm wants to attract and retain the best talent – and I think we can all agree that the UK financial services sector demands and deserves the best – then firms need to stand... well, firm.

Turning a blind eye to toxic behaviours not only drives away good staff, but has to raise serious questions about a firm’s wider decision-making and risk management.

These environments where people don’t feel psychologically safe to speak up can become breeding grounds for even bigger problems – hidden mistakes, ignored risks, and ultimately, harm to consumers and our markets. 

And that is why healthy firm cultures are, and will continue to be, not just a moral issue, but a regulatory concern too.

Building trusted markets

The FCA has always been clear that this kind of behaviour has no place in our industry. 

And we know that regulators have an important role to play in tackling sexual harassment, bullying and discrimination.

We have been updating our rules and guidance on non-financial misconduct and we expect to set out more detail on our proposed next steps shortly.

In terms of diversity and inclusion more broadly, we are considering, alongside the Prudential Regulation Authority (PRA), the next steps following our consultation. 

That includes how our work dovetails with planned activity from the government, such as on employment rights, gender action plans and disability and ethnicity pay gaps. 

But as this develops, we need to bear in mind that rules and guidance will not be enough on their own. 

It will also take action from firms when this kind of abuse does occur. This may involve some uncomfortable conversations at times – doing the right thing often does.  

But I know you share our desire to work together to get this right: for your employees, for consumers, our sector, and our economy. 

And of course, healthy cultures aren’t just for the firms we regulate – they start with us.

That is why the FCA has robust people policies in place… 

Why we invest in developing our people managers and senior leaders… 

And why we are delivering an evidence-based diversity, equity and inclusions (DEI) programme, to support an inclusive culture where people feel safe to speak out.  

We really value the feedback we get from employees on what we can do better, and our 2024 employee survey results showed an improving picture. 

One of the biggest score increases was on ‘Our Culture’.

People are at the heart of what we do at the FCA, and we will continue to drive a healthy culture that supports colleagues to deliver.  

The ripple effect of culture: herd immunity or viral outbreak?

The good news is that healthy firm cultures are contagious too.

When respect, integrity and accountability are woven into the fabric of an organisation, they act like a social immune system – catching bad behaviour early and stopping it from spreading.

But as with any immune system, it needs to be actively maintained. 

And senior leaders have a vital role to play.  

I know many of you will be grappling with the realities of leading in complex and demanding environments, and building a strong positive culture can sometimes feel like an uphill battle.  

But it’s also one of the most powerful tools we have to drive success, gain a competitive advantage, and boost longer-term resilience.

We introduced the Senior Managers and Certification Regime (SM&CR)[3] to encourage individuals to take personal responsibility for their actions. 

To make sure firms and staff clearly understand, and can show, who does what. And in doing so, to improve conduct at all levels.

I am pleased that there is such broad support for the regime and its aims.  

The key principles have been successful in driving up standards across the industry, supporting a culture of accountability that reduces the likelihood of harm. 

So much so, that the UK is now seen as a global leader on accountability, with other countries developing regimes inspired by ours.

And when we speak to firms, they tell us they’ve found that clear accountability hasn’t just helped with good governance, but contributed to business success more widely. 

Because when people know who is responsible for what, governance becomes stronger, decision-making becomes sharper, and risk management becomes more effective.

While the SM&CR’s primary aim is prevention rather than sanction, enforcement is also a critical part of our toolkit.  

We know that speed matters in enforcement, which is why we have streamlined our investigation portfolio, focusing on where enforcement action would drive the most impactful deterrence, to deliver investigation results sooner.

A couple of quick examples: we recently closed cases with Volkswagen Finance[4] and Starling Bank[5] which took 13 and 14 months respectively – a significant improvement on the average of 42 months for cases closed in 2023/24.

And we are working alongside the Treasury and the PRA on reviewing the SM&CR to make it even more efficient and effective, and will publish a consultation paper in due course.  

Conclusion

Most of us can shake off a winter bug in a few days. 

But toxic cultures, left unchecked, can cause lasting damage – for employees, consumers, firms, markets and the wider economy.

The good news? A healthy culture, like a healthy immune system, can stop harm in its tracks and spread benefits far and wide.

So my question of you is: what kind of culture are you spreading? Confidence or complacency? Integrity or indifference?  

Your answer doesn’t just define your firm. It shapes the future of our financial system.  

So let’s keep working together to spread the kind of culture that strengthens resilience, builds trust and delivers lasting positive change.