Wednesday 21 September 2011

Where do we go from Vickers?

After a long summer's lobbying, the final report of the Independent Commission on Banking (the Vickers' Commission) was finally published earlier this month. After digesting the report and its commentary (including the massive governance breech at UBS which nicely demonstrated the timeliness of the debate), the outcomes for the governance and culture agenda appear to be:

  • the proposed ring-fence around banks' retailing operations will entail measuring and managing cultures on both sides of the fence. As Vickers says: 'It is difficult for regulations to work effectively if they are operating against the grain of corporate culture. So, alongside financial restrictions, the governance of a ring-fenced bank should reflect and encourage an appropriate relationship with the rest of the group.' (74) A view endorsed in a Financial Times editorial.
  • the onus of managing corporate culture will fall on banks' management rather than the regulator. As Vickers says: 'While corporate culture cannot be directly regulated, these measures should assist in building a separate, consumer-focused culture in UK retail banking, and a distinctive identity within the ring-fenced bank.' (76) A view partially endorsed in a briefing by the right-wing think tank Adam Smith Institute
  • there is much to play for here still. As Michael Cohrs (member of Bank of England’s Financial Policy Committee) said in a Financial Times roundtable on Vickers: 'The report does talk a lot about culture and the need for cultural change between certain types of banking operations. I think if I were critical of the report the one place would be maybe not enough attention was put on how do you create or how do we create different cultures, the retail culture which is quite different from the wholesale culture.'
In view of this ongoing debate, the 'Governance Beyond the Boardroom' team has brought together a number of researchers and practitioners to support the next stage of project. The project team is now led by Dr Andrew Tucker (Brunel University) with Dr Simon Ashby (Plymouth University) and Prof Ken d'Silva (London South Bank University). A number of banks and relevant organisations have joined the advisory board and committed their time to help the project operationalise the governance culture toolkit framework published here in January. 

The main outputs that we expect to deliver are as follows:
  • A process tool that highlights the essential stages and decisions associated with the implementation of effective governance arrangements.
  • An audit tool, which allows institutions to compare themselves against identified examples of good practice and assess the gaps in their own practice.
  • A suite of recommended metrics (both qualitative and quantitative) that are used to monitor the performance of new or existing governance arrangements. This will include metrics that allow institutions to assess their governance culture.
  • Case studies to illustrate good practice.
  • Face-to-face training sessions and bundled e-learning modules.
If you would like to be part of the ongoing project, we look forward to hearing from you. Please contact andrew.tucker@brunel.ac.uk.

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