A Starling Insights Deeper Dive Report

Supervisors on Supervision

— Chapter Three At-A-Glance —

Signals | Shared observations across stocktake participants

• Crisis response: many of the jurisdictions that leaned into culture risk supervision did so in response to a crisis; highlighting the need for purposeful and proactive attention.
• Context matters: no one-size-fits all approach; but there are common learnings, including the need for legal frameworks, management buy-in, and coordination across conduct and prudential regulation.
• Real change: Many jurisdictions have developed competencies around culture risk; successful ones recognize the need to understand how culture is embedded in governance — and vice versa.
• Lessons to be learned: efforts focusing on tone-from-the-top, accountability regimes, and incentives have shown results — but also shortcomings; there is opportunity to embrace relevant learnings.
• What follows: participants describe the need to embed culture risk governance and supervision, at scale and with coherence; move from pilots to protocols and run horizontal peer reviews.

Stakes | Observed consequences of the status quo

• Mandate: integrating culture risk supervision is more successful with a clear mandate, policy support, and strong leadership; coordination across conduct and prudential regimes reduces conflicts.
• Better solutions: tools that make use of horizontal peer reviews and AI offer promise, but can be difficult to implement; need strong support and readiness to innovate if we are to advance.
• Collaboration: collective action required; without trust and mechanisms for effective challenge, culture risk supervision suffers; buy-in is necessary to achieve mutual benefit between supervisors and firms. 
• What follows: institutionalize culture risk supervision; adopt a multi-lens toolkit and build towards coherence (not uniformity) via minimum methods and a shared lexicon.

Summons | Opportunities and challenges to take up

• Examiners: anchor analysis in observed behaviors, with a clear evidence trail; focus should extend beyond culture assessments to ensure firm governance and culture are mutually reinforcing.
• Boards & Executives: must be able to demonstrate how challenge and escalation works in practice, not merely on the org chart or in policy; culture risk governance ‘throughputs’ prevail over ‘inputs.’
• Policymakers: foster a supervisory approach that looks to matters of culture in order to support supervisory judgment; acknowledge agencies and firms that embrace relevant initiatives.
• What follows: establish a practical baseline — shared lexicon, minimum methods, common frameworks — to corroborate culture-relevant judgments among firms and supervisors.