Stephen Scott: Changing Supervision for Good

In a just-published article in The Banker, Stephen Scott, Starling's Founder & CEO, argues that, in order to change banking for good, we must also change banking supervision for good.

Scott looks back upon the UK's Parliamentary Commission on Banking Standards (PCBS), launched in 2012 in response to rampant misconduct and flagging trust in the financial sector. The following year, the Commission published its final report entitled Changing banking for good. "Trust in banking can only be restored when it has been earned, and it will only have been earned when the deficiencies in banking standards and culture, and the underlying causes of those deficiencies, have been addressed," the report read.

In the decade since that report, bank regulators and supervisors globally have adopted many of the report's suggestions, with a clear focus on improving behavior and culture in the financial sector. "But we tend to lose sight of the fact that the PCBS took aim at bank supervision, not bank management," Scott writes. "Recent turmoil has once again returned attention to the central role of banking supervisors in changing banking for good."

There have, of course, been efforts in this direction. For instance, Scott points to the Financial Stability Board's 2018 Strengthening Governance Frameworks to Mitigate Misconduct Risk: A Toolkit for Firms and Supervisors, which sought to offer suggestions for how bank leaders and supervisors could begin addressing the interplay between culture and misconduct. However, the vagueness of this guidance led to similarly vague reactions.

"It is time to operationalise the FSB's 2018 toolkit," Scott concludes. "This will require collaboration between firms, supervisors, academics and technologists, and orchestrating such collective action will require determined leadership... Ten years on from the PCBS report, it has become clear that changing banking for good implies changing supervision for good as well."

For more on this topic, read Scott's Closing Comments to our recent Deeper Dive report, "UK Parliamentary Commission on Banking Standards: A Global 10-Year Look-Back."