HKMA Publishes Report on Review of Self-Assessments of Bank Culture
HKMA published a report on the review of self-assessments on bank culture in Hong Kong. The report is based on submissions by 30 authorized institutions that were covered in the first phase of the self-assessment exercise and include all major retail banks and selected foreign bank branches with substantial operations in Hong Kong. HKMA reviewed self-assessment reports from these banks with a view to providing a range of practices as well as identifying common themes for reference by the industry. HKMA has identified a range of practices under each of the three pillars—governance, incentive systems, and assessment and feedback mechanisms. These practices can be a handy reference for authorized institutions as they move on and devise further culture enhancement measures.
HKMA is encouraging authorized institutions to pay more attention to the following common themes that have been identified from the self-assessments:
- Further work is needed to ensure that banks' incentive systems are designed to promote sound culture and prevent incidents of misconduct.
- Stronger links are required to connect Hong Kong operations of banks with the culture efforts of their headquarters or upstream entities as well as their downstream operations, as appropriate.
- Deeper analysis is expected to benchmark themselves against the findings from the reviews of the major overseas misconduct incidents.
- More focus is needed to facilitate the undertaking of the continuous professional development under the Enhanced Competency Framework or by other professional bodies to complement the effort of promoting sound culture.
- More effort is needed to tackle the key challenge of culture assessment to identify the gaps between current progress and desired culture.
- More work is needed in promoting an environment that provides psychological safety to encourage staff to speak up without fear of adverse consequences.
- Sustained effort is required in driving cultural changes and banks should be mindful of culture fatigue.
The insights drawn from the self-assessments informed the future work of HKMA on supervision of bank culture. Going forward, HKMA will conduct focused reviews to deep dive into the incentive systems of front offices in the business of distributing banking, investment and/or insurance products in retail banks. HKMA has already commenced dialog on bank culture with several authorized institutions (in 2019) and the engagement with authorized institutions will continue going forward. HKMA will also continue to work closely with the industry in promoting sound bank culture. HKMA will continue to gauge the progress of bank culture reform in Hong Kong and share industry-wide insights and practices on culture with the industry, as and when appropriate. HKMA will also continue to explore other culture initiatives, taking into account overseas experience and emerging themes that may arise.
Keywords: Asia Pacific, Hong Kong, Banking, Bank Culture, Governance, Incentive Systems, ESG, Operational Risk, HKMA
Previous Article
MNB Publishes Financial Stability Report for May 2020Related Articles
BCBS Amends Capital Treatment of Non-Performing Loan Securitizations
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
BoE to Move Statistical Data Collection to BEEDs Portal
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.
APRA Updates Reporting Standards and Guidance for EFS Data Collection
APRA published the updated reporting standards and guidance for the collection of Economic and Financial Statistics (EFS), following a consultation process. Also published was a response letter to the feedback received on the proposal for amending the EFS reporting standards and guidance.
EC Consults on Criteria for Environmentally Sustainable Activities
EC is consulting on a draft delegated regulation to supplement the Taxonomy Regulation (2020/852) by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as environmentally sustainable.
IFRS Examines Incorporation of Climate Risk Issues into IFRS Standards
The IFRS Foundation published material highlighting the ways in which existing requirements in IFRS standards require companies to consider climate-related matters when their effect is material to the financial statements.
EBA Analyzes Impact of Unwind Mechanism of Liquidity Coverage Ratio
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
ECB Outlines Views on Possible Changes to AnaCredit Rule and TLTROs
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB Begins First Phase of Post-Implementation Review of IFRS 9
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB Report Examines Progress in Resolvability of Systemic Institutions
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA Benchmarks National Insolvency Frameworks Across EU
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
