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 ArticleMNB Publishes Financial Stability Report for May 2020
The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.
The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.