This statement of policy applies to all firms and sets out how the Prudential Regulation Authority (PRA) uses its powers to address serious failings in the culture of firms. The culture of a firm has a significant impact on the PRA’s objectives of promoting safety and soundness of firms and, for insurers, an appropriate degree of protection for policyholders. The culture of a firm includes its standards of behaviour.
This statement also explains how the PRA’s use of its powers meets the recommendations of the Parliamentary Commission on Banking Standards contained in paragraphs 970-973 of Changing Banking for Good, which were that regulators should have powers to identify and tackle serious failings in standards and culture within banks they supervise, and for the PRA and the Financial Conduct Authority to consider cases when such powers should be deployed.
This statement is consistent with the PRA’s current approach to supervision and does not place any additional requirements or expectations on firms. It should be read alongside the PRA’s approach documents which provide a full description of the PRA’s supervisory approach.
The PRA contributed to development of the Financial Stability Board’s Guidance on Supervisory Interaction with Financial Institutions on Risk Culture, which may inform future development of the PRA’s supervisory approach.