Hong Kong SAR - HKMA Reiterates the Importance of Seven Common Themes on the Journey to Sound Bank Culture
The HKMA’s Executive Director in charge of Banking Conduct, Alan Au, recently gave a speech in which he reiterated the importance of the HKMA’s main messages on bank culture.
The HKMA published a report and a circular in May 2020 on the review of the self-assessments on bank culture (see our blog) which highlighted seven common themes. Mr Au’s speech focuses on these seven themes again as he underlines that the current conditions make it as important as ever to ensure a sound bank culture within these parameters.
Incentive systems – the HKMA believes that further work is needed to ensure that incentive systems are designed to promote sound culture and prevent incidents of misconduct. The HKMA expects to see more initiatives that will ensure appropriate incentive systems across the entire bank at all levels e.g., banks need to make regular reviews including the effectiveness of remuneration structures and practices.
Ensure consistent wider group culture - stronger links are required to connect banks’ Hong Kong operations with the culture efforts of their headquarters or upstream entities as well as their downstream operations. One identified area of weakness was how adjustments to group policies are made in relation to local circumstances, and how overseas headquarters are providing support for implementing culture enhancement initiatives in Hong Kong.
Reviewing major overseas misconduct incidents – banks need to keep track of key international misconduct developments and draw lessons from the incidents as far as possible.
Facilitate continuous staff professional development – this is important in order to implement and complement the effort of promoting sound culture.
Culture gap analysis – the HKMA believes that more work needs to be done in identifying gaps between where banks are currently on their journey to sound culture and arriving at the desired culture.
Whistleblowing environment - more work is needed in promoting an environment which provides “psychological safety” to encourage staff to speak up without fear of adverse consequences.
Beware of “culture fatigue” – the HKMA warns banks that sustained effort is required in driving cultural changes, hence the possibility of “culture fatigue” if they implement a large variety of culture initiatives in a “form over substance” approach that overwhelms their staff.