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FCA: Time to ‘speak up'

  • United Kingdom
  • Employment law
  • Financial services

29-09-2020

The FCA has repeatedly highlighted its focus on conduct and culture; most recently, the regulator noted in its Annual Report its key priority of promoting and embedding healthy cultures as a means for reducing potential harm. The role of the whistleblower is integral to this objective. The FCA disclosed in the Annual Report that from April 2019 to March 2020 it managed and assessed 1,153 whistleblower reports consisting of 2,983 separate allegations. In 210 of these cases the FCA took action to mitigate harm.

The annual Banking Standards Board (BSB) 2019 Employee Survey of around 80,000 employees across 29 firms in the UK banking industry illustrates the ways in which whistleblowing, conduct and culture are inextricably linked.

The responses to the BSB survey throw up some interesting – and concerning – trends, which are likely to be replicated across other financial institutions.

23% of respondents admitted that they had wanted to raise at least one concern over the past 12 months but did not do so. 12% of the concerns that were not raised related to ‘personal concerns’, including bullying, discrimination and sexual harassment.

The most common concerns that were raised related to workload, colleague competence and capability, and performance management.

It appears that there are real apprehensions about behaviours which are going unscrutinised, which could pose real risk to a business.

Protect, the whistleblowing charity, recently published a report examining whistleblowing in the financial services sector, which noted that in a third of cases observed, the employer ignored the concerns that had been raised and that 7 in 10 of those individuals raising concerns were victimised for doing so.

What, then, is going wrong and how can it be improved?

Why are employees staying silent?

Tellingly, the BSB survey shows that those who wanted to raise personal concerns were 11% more likely to remain silent relative to those with other types of concern. Previous research has shown that reasons for not speaking up can be loosely grouped as fear and futility. Personal concerns are subjective and hard to ‘prove’ and individuals may fear reprisals or being disbelieved, along with the risk of ramifications, which may flow from making a disclosure.

However, the FCA wants individuals to speak out and for personal behaviours to be exposed where they are wanting. The regulator has pinpointed ‘non-financial misconduct’ as an area of particular concern and has made clear that fitness and propriety assessments should robustly address non-financial misconduct when considering an individual’s suitability to undertake a senior manager or certified role. Last year’s feedback on the FCA’s 5 Conduct Questions programme clarified that non-financial misconduct should include sexual misconduct, sexual harassment, other forms of harassment, bullying, discrimination, favouritism, exclusion and intimidation. The regulator emphasised that non-financial misconduct should be tackled with far more energy at both senior manager and other staff levels.

The BSB analysis also highlighted another factor for remaining silent: a potential whistleblower’s ethnicity. Black and Asian people were respectively 13% and 8% more likely to remain silent than their White counterparts. If there is disproportionate voice from specific communities, this gives cause for concern. The financial services regulators have highlighted the need for – and benefits of – diversity in firms; if there is a reluctance among Black and Asian communities to report wrongdoing, this goes to the heart of a firm’s culture. To this extent, firms should be looking to see how they can increase confidence in these communities and to ensure that all minority groups are listened to, removing the barriers – psychological or otherwise – that impede speaking up.

The fact that particular concerns are not being raised suggest that a firm’s culture has not made it ‘psychologically safe’ for an individual to speak out and that work needs to be done to improve that culture. The BSB survey states that the single most used channel for speaking up is the individual’s line manager. Whether employees used one channel or several to raise their concern(s), around 80% of them still spoke to their line manager. It is clear that the role of the line manager is critical in ensuring that staff feel secure when making disclosures to their managers, and that the managers themselves are able to deal with the disclosures appropriately and fairly.

Who handles whistleblowing concerns?

Given that the large majority of whistleblowing concerns will at some point be handled by line managers, it is imperative that managers receive regular training on how to handle disclosures and remain impartial at all times. In particular, the importance of maintaining anonymity where it is requested is very important. The BSB survey noted that the HR channel is less likely to be the only one used to raise a concern, which suggests that when individuals raise concerns with HR they are very likely to have raised it elsewhere as well. The BSB survey found that 48% of people who raised their concerns with line managers expressed dissatisfaction; this sends a clear signal to firms that line managers are critical in ensuring that concerns are properly handled, ultimately improving a firm’s culture. There is work to be done!

Line managerial capability as the first point of contact is likely to be even more challenging in a virtual environment. The development of soft skills is essential and firms should invest in ensuring that their managers have the right tools with which to handle concerns.

Whistleblowing channels

The FCA noted in its most recent 5 Conduct Questions that despite clear official whistleblowing and other escalation channels being in place, these are largely unused and reserved for the most serious cases. The FCA saw a persistent and significant lack of psychological safety in day-to-day speak up and challenge. As noted above, cultivating psychological safety is vital for a healthy speak up environment.

Only banks, deposit takers and larger insurers are obliged to implement the FCA and Prudential Regulation Authority whistleblowing rules although these are encouraged as best practice for other financial institutions. The whistleblowing rules are a very good starting point but successful implementation of the rules requires more work and management buy-in. If the official whistleblowing channel – which allows for a much wider variety of issues to be raised than under the more restrictive whistleblowing rules in the Employment Rights Act 1996 – is being under-used, firms should ask themselves why this is and take steps to encourage appropriate use. However, this should be handled sensitively; the FCA has criticised some firms for being too ‘strident’ in their approach, fostering a ‘speak up or else’ environment. Now is the time to review policies and procedures and to refresh training.

Banking Standards Board - Assessment Results 2019
Silence in the City 
FCA - Industry Feedback for 2018/19 - Wholesale Banking Supervision
FCA - Industry Feedback for 2019/20 - Wholesale Banking Supervision