Andrew Bailey, FCA chief executive, has attacked the ‘greed is good’ era and and called for a new culture in financial services.

Mr Bailey, speaking at the FCA’s ‘Transforming culture in financial services’ conference this morning, looked to the mistakes of the past as a reason for building a new framework for the future.

In a keynote speech, he told delegates: “Culture is not naturally pursued by a regulator like the FCA by making rules. We would not achieve much by making a rule which said that all firms should have a good culture.

“I want to be clear however, and I will come back to this point, that culture in firms is influenced by the rules we make and the incentives they create, so there is a very important role for our rules, but it is not a direct prescribing of culture.”

Referring to previous practices he said: “Unfortunately, if you look back over the last decade and more, we have seen too many instances of misconduct, some of which we are still dealing with. As supervisors, our objective is to prevent misconduct, not just clear up the messes when they happen.

“No supervisor can guarantee good conduct at all times, much though we wish it, but we do expect to act to pre-empt and anticipate poor conduct, and society has a right to expect this.

“If you follow this line of argument, I think it is natural that as a public interest authority, we want to do all we can to understand the drivers of poor conduct so that we can seek to prevent them.”

He advocated a different system of rewards and incentives and railed against 1980s excess, at the speech in London, telling the audience: “In essence, the system that operated from the Great Depression until the 1980s had relied on the legacy of the 1930s and an almost unstated code in society, that the remuneration of senior corporate executives should not increase beyond a quite limited multiple of average pay, on the basis that to breach this relationship would be viewed as ostentatious and breaking a norm that acted as a glue in society more broadly. 

“Things changed from around the early 1980s. You can label it the 'greed is good' era if you can remember the first Wall Street film with Michael Douglas.”

Mr Bailey called for more rigour and rectitude in the way financial services operates, adding: “A culture that pursues diversity and equal opportunities is I think one that will have much wider benefits for an organisation.  

“It suggests a culture that is open-minded, tolerant, aspiring to improve and considerate.  When I look back at the cultures that I have seen where things have gone wrong, those are not descriptive terms that I would employ.”  

He concluded by saying: “I can safely predict that the issue of culture and its role in the conduct of firms will run and run, as it should, because it should not stand still.”