Hong Kong - HKMA Shares Initial Observations From Banks’ Self-Assessment On Culture.
Legal News & Analysis – Asia Pacific - Hong Kong - Regulatory & Compliance - Banking & Finance
22 January, 2020
The Hong Kong Monetary Authority (HKMA)’s executive director for banking conduct, Mr Alan Au, recently delivered a speech on bank culture at the 1LoD Summit in Hong Kong.
To briefly recap:
Although the HKMA is still in the process of reviewing the self-assessments submitted by the 30 AIs, Mr Au took the opportunity of the 1LoD Summit to provide the HKMA’s initial observations on how the AIs have approached culture reform, and highlight some good practices and common issues of concern observed.
AIs (whether or not they are among the 30 AIs who have submitted their self-assessments) should take note of the observations and guidance provided by Mr Au and enhance their culture initiatives as appropriate.
Going forward, the HKMA plans to further progress its culture supervisory measures, including:
Mr Au noted that it is encouraging to see that AIs generally agree with the need to foster sound culture, and have been implementing a range of culture enhancement initiatives.
The HKMA has identified some common themes from the self-assessments which it expects AIs to take note of:
Mr Au shared some of the HKMA’s initial observations on how AIs have approached culture reform in respect of the three pillars and provided examples of good practices observed.
Pillar 1: Governance
The HKMA is pleased to see that all 30 AIs invited to the self-assessment exercise have a framework for board supervision of culture. All locally incorporated banks have a board-level committee chaired by an independent non-executive director to oversee culture-related matters, and overseas incorporated banks have board-level oversight at either a global or regional level on such matters.
It is important that AIs’ leadership cascades the “tone from the top” through effective and continual communication and training. Mr Au gave examples of the ways in which two of the AIs communicated their culture expectations in a language that can be easily understood by staff:
Pillar 2: Incentive systems
The HKMA encourages AIs to provide incentives (both monetary and non-monetary) for desired behaviour as well as disincentives for undesirable behaviour.
Mr Au gave examples of the systems two AIs used:
Pillar 3: Assessment and feedback mechanisms
Many AIs have just set up their culture dashboards and are still at an early stage in determining the right indicators. One AI was noted to have developed a dashboard which incorporated multiple data sources, including feedback from their employee survey (in which the employees would rate perceptions of themselves as well as other colleagues) and other quantitative data which allowed for the different data sources to be triangulated.
While all AIs involved in the self-assessment had certain whistleblowing mechanisms in place, it is important that they also provide adequate protection to employees who speak up.
For further information, please contact:
William Hallat, Herbert Smith Freehills