Contributions to the Supervisors on Supervision Stocktake
"The culture of the supervisory organization is influenced by both internal and external factors. While external factors draw from political economy and the business environment, internally, the strongest drivers are ‘tradition’ and ‘tone from the top’.
You may have periods where political masters seek to centralize authority or direct supervisory decisions in the pursuit of interests that conflict with the supervisory mandate. However, what endures over decades, and re-emerges when the political cycle reverses, is a strong tradition of a supervisory culture that is focused on its mandate, and which internalizes and communicates lessons from failures and successes.
This must be constantly reinforced because people are coming in and leaving the organization.
This reinforcement comes not only from the 'tone from the top,' which clearly and constantly messages these values which underpin supervisory culture, but also from what the folks down below see in the actions of those at the top in how they are in fact responding to external pressures.”
What steps should regulators consider to enable more effective culture risk supervision?
"Independence often gets misunderstood. When you talk to a government minister and say the supervisory agency should be independent, they might blow their top and say, 'They're not elected leaders; they can't be independent.' Then you have to explain what you mean by independence.
Independence is not autonomy, nor is it free will. Independence means you let them do their job. If they don't do their job, then you can hold them accountable, but you cannot interfere in how they do it. Because if you do that, they're not going to be able to perform.
That's why I say that independence should always be used along with accountability. Those two have to go together.
Building an accountability system and an independent system requires design at a level of structure, reporting, transparency, and public communication. All of that together builds the credibility of the supervisor so that people can say, 'Okay, we can expect these guys to do what they're supposed to do.'"