A Starling Insights Deeper Dive Report

Supervisors on Supervision

— Chapter One At-A-Glance —

Signals | Shared observations across stocktake participants

• Definitional drift: “culture” lacks a common language; ambiguously used to refer to both specific behaviors and general outcomes; inconsistently tied to governance; unclear scope hinders consistent examination.
• Backward‑looking practice: culture typically wins attention only in post‑mortems, after harm is done and loss is suffered; once immediate crisis has passed, learnings are not carried forward consistently.
• Looking inward: recognition that the culture of supervisory agencies is important; attention to their own culture gives supervisors greater legitimacy; supervisory discretion without discipline risks credibility.
• Cross‑border divergence: inconsistent approaches diminish ability to gain global insight into material qualitative risks; poor signal‑to‑noise ratio weakens peer comparability and due‑process.
• What follows: these patterns create the consequences and challenges explored in the next chapter; where ambiguity regarding culture risk governance and supervision inhibits timely, consistent, prudential action.

Stakes | Observed consequences of the status quo

• Conduct and Prudential Convergence: recognition that conduct and prudential concerns share common roots in culture; conduct risks often precede and anticipate downstream financial risks.
• System relevance: policy balkanization raises costs, invites regulatory arbitrage, incentivizes box‑ticking over substance, deteriorates relations between firms and officials, and allows gaps in oversight.
• Legitimacy test: supervisory judgment must be observable, proportionate, and explainable or face challenge (legally, politically); erosion of trust makes the practice of supervision more difficult.
• What follows: these stakes frame the practical frictions the next chapter makes explicit.

Summons | Opportunities and challenges to take up

• Examiners: work through definitional ambiguity and inadequate tools to provide better guidance; supervisory culture should be an area of focus to improve outcomes and to build trust and legitimacy.
• Standard‑setters & international bodies: uncoordinated approaches drive higher cost and discourage sharing of best practices; need shared vocabulary and goals that travel across borders and agencies.
• What follows: a foundation to contextualize next chapter’s examination of consequences and challenges.