A Starling Insights Deeper Dive Report

Supervisors on Supervision

— Chapter Four Executive Summary —

Why this chapter exists

Having made the case for culture risk governance as a matter of supervisory concern (Chapter 1), having argued for disciplined discretion in the exercise of culture risk supervision (Chapter 2), and having examined early efforts to institutionalize relevant practices, and the learnings this has afforded (Chapter 3), this chapter asks a forward-facing question: what will it take to move culture relevant supervisory practices from the past halting experimentation towards enduring practice going forward?

The urgency is real. As recent events reaffirm, culture remains a driver of institutional failure and a blind spot in supervisory response. Supervisors face mounting pressure — from within and without — to clarify their role, expand their toolkits, and explain their judgements. But a step-change is needed: from conceptual agreement to coherent application.

Chapter 4 charts the conditions required for that shift. It argues that supervisory innovation must be deliberate, infrastructure-backed, and globally coherent. And it insists that, if culture is to be governed credibly, it must be rendered meaningfully measurable, and supported by practice, not just principle. This chapter thus sounds a call for practical scaffolding: for supervisors to equip themselves with the mandates, mindsets, capabilities, and collaboration needed to embed culture risk governance at scale.

What you’ll see along the way

The risk of regulatory drift: Supervisors and firms alike continue to acknowledge the relevance of culture, but often fail to act — consistently and coherently — on that recognition. Legal frameworks remain patchy and interpretive boundaries are unclear. While culture is routinely cited as a contributing factor to governance and supervisory lapses after-the-fact, few firms or agencies have translated that diagnosis into proactive capabilities. The result is hesitation, inconsistency, and skepticism. To earn credibility, supervisors must be able to show their work — including to one another.

The imperative of innovation: Supervisory innovation is no longer optional. Rapid change in financial services — from digitization to decentralization — demands supervisory regimes that are adaptive, not reactive. But innovation requires heightened risk tolerance, experimentation, and collaboration. It also means rewarding internal curiosity, protecting supervisory judgement, and clarifying internal governance. Agencies must evolve their own cultures if they expect firms to do likewise.

The need for common evidence: Without a shared evidentiary core, culture related supervision remains exposed to the charge of arbitrariness. Supervisory decisions must rest on reliable indicators that are auditable, interpretable, and proportionate — even, or especially, when they cannot be perfectly objective. Relevant efforts are emerging: from combing HR data for predictive indicators and reliable behavioral markers, to network analysis and the culture dashboards they illuminate. Also needed are investments in behavioral science, AI-enabled tools, and sandboxes within which we may test new approaches. Legitimacy demands shared templates, structured discretion, and guardrails to protect against arbitrary engagement or perceptions of supervisory overreach.

The case for global collaboration: Culture risk governance is a system-wide concern. But, absent cross-border coordination and methodological convergence, these efforts to date remain siloed. International standard-setters have yet to prioritize the supervision of culture risk management capabilities with the rigor applied to questions of capital or liquidity. This chapter surfaces a growing consensus: that global coordination is needed, not to mandate uniformity, but to enable learning, reduce burden, and build legitimacy. Proposals include public-private methods programs, evidence-sharing platforms, and convenings to curate best practice. Aiming for coherence over conformity, a trusted broker is called for to convene the necessary dialog.

Where this leaves us

Four convictions emerge from this closing chapter:

First, culture risk supervision must move from concept to capability. Supervisory speeches and working groups are not enough. Without training, tools, and processes that embed culture into routine supervision, progress will remain fragile. Agencies must make this work operational — as they have for financial risks.

Second, innovation must be institutionalized. Experimentation cannot remain ad hoc. It must be encouraged by leadership, supported by infrastructure, and grounded in supervisory routines. If discretion is to retain legitimacy, it must rest on methods that are transparent, scalable, and defensible.

Third, coordination is a first-order supervisory need. Without global convergence, supervisors risk talking past each other. Shared architecture is needed: not only to compare, but to improve. Without it, innovation will remain the privilege of a few — and trust will remain unevenly distributed.

And so lastly, Chapter 4 closes with a call to action: The supervisory community must collaborate to pilot efforts that will help us to derive a common evidentiary basis by which culture related questions are examined. They must coordinate to enable horizontal peer reviews that can be conducted in a consistent and transparent manner that affords due process and fair challenge. They must develop templates that structure discretion without dulling it. And they must engage in such efforts now — before crisis forces them to do so.