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 A crisis of culture Valuing ethics and knowledge in financial services

Contents
About the report 2

Executive summary 3

Introduction: In search of culture 5

Case study: Rebranding Goldman Sachs 8

Chapter 1: Ethics in the firm 9

Case study: Changing tracks at UBS 12

Chapter 2: Safety in knowledge 13

Chapter 3: Reincorporating culture 15

Case study: Keeping it simple 17

Conclusion 18

Appendix: Survey results 19

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 A crisis of culture Valuing ethics and knowledge in financial services

About the
report

A crisis of culture: Valuing ethics and knowledge in financial l Michel Derobert, general secretary, Swiss Private
services is an Economist Intelligence Unit (EIU) report, Bankers’ Association
sponsored by CFA Institute. It examines the role of integrity
l Bob Gach, managing director, Capital Markets, Accenture
and knowledge in restoring culture in the financial services
industry and in building a more resilient industry. The report l Steven Münchenberg, chief executive officer, Australian
draws on three main sources for its research and findings: Bankers’ Association

l A global survey of 382 financial services executives l Robert Potter, chairman, City HR Association
conducted in September 2013. Of these, 42% are based in l Ulf Riese, finance director, Handelsbanken
Europe, 34% are based in Asia-Pacific, and 20% are based in
North America. One-half are C-suite executives, and the rest l Hiba Sameem, researcher, The Work Foundation
are senior executives and managers. Nearly one-fifth (18%) l Richard Sermon, chairman, City Values Forum
are executives from asset management firms, 16% are from
l Jacques de Saussure, senior partner, Pictet
commercial banks, 15% are from retail banks, 12% are from
insurance and reinsurance firms, 11% are from private banks, l Jon Terry, global head, HR Consulting Practice, PwC
11% are from fund management firms, 9% are from investment l Andre Spicer, professor of organisational behaviour, Cass
banks, and 8% are from wealth management firms. Business School
l A global survey of 50 executives from firms supporting the l Gert Wehinger, senior economist, Financial Affairs
financial services industry across a number of areas, including Division, OECD Directorate for Financial and Enterprise
technology, marketing and business processes. Affairs
l A series of in-depth interviews with senior financial industry l Martin Wheatley, chief executive officer, Financial
executives and experts: Conduct Authority
l Juan Ignacio Apoita, global HR director, BBVA
We would like to thank all interviewees and survey respondents
l Peter Cheese, chief executive officer, Chartered Institute for their time and insight. The report was written by Michael
of Personnel and Development Kapoor and edited by Sara Mosavi.
l Prasad Chintamaneni, global head of banking and
financial services, Cognizant
l E. Gerald Corrigan, managing director, Goldman Sachs

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 A crisis of culture Valuing ethics and knowledge in financial services

Executive
summary

Back in 1980, just 9% of Harvard MBAs went role that greater knowledge plays in building a
into financial services. By 2008, the figure was stronger culture within financial services firms.
up to 45%. Lured to Wall Street and the City
by generous pay packages, financiers were The main findings are as follows.
encouraged to chase rapid earnings growth. l Most firms have attempted to improve
Short-term profit priorities led to extreme adherence to ethical standards. Global
risk-taking at many firms, with employees institutions, from Barclays to Goldman Sachs,
selling complex derivative products they did not have launched high-profile programmes that
understand (and that many of their corporate emphasise client care and ethical behaviour. Our
clients did not need), and lending to people who survey supports the anecdotal evidence, with
could not afford the repayments. nearly all of the firms represented in the survey
having taken steps to improve adherence to
Since the global financial crisis of 2008, the
ethical standards. Over two-thirds (67%) of firms
question being asked about the industry is
represented in the survey have raised awareness
whether it can change, shifting its culture to
of the importance of ethical conduct over the
become more risk-averse and client-centric.
last three years, and 63% have strengthened
There is little doubt that strengthening culture,
their formal code of conduct and the system
including the promotion of ethical conduct
for evaluating employee behaviour (61%). Over
and greater knowledge, is a priority for the top
two-fifths (43%) of respondents say their firms
echelons in the financial services industry. In
have introduced career or financial incentives to
recent years many firms have launched thorough
encourage adherence to ethical standards.
reviews of their practices as part of their efforts
to decide who they are, what they do, and how l Industry executives champion the
they should do it. But it could take years before importance of ethical conduct... Despite a spate
change is seen at all levels of the organisation. of post-crisis scandals that suggest continued
profit-chasing behaviour, large majorities agree
In A crisis of culture we examine the global that ethical conduct is just as important as
financial services industry’s record on ethical financial success at their firm. Respondents would
conduct; we investigate the level of knowledge also prefer to work for a firm that has a good
financial services executives have of their own reputation for ethical conduct than for a bigger
firm and of their industry; and we explore the or more profitable firm with questionable ethical

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 A crisis of culture Valuing ethics and knowledge in financial services

standards. Nearly three-fifths (59%) personally making their firm more resilient to risk. Three-
view the industry’s reputation on ethical conduct fifths think gaps in employees’ knowledge pose a
positively; and 71% think their firm’s reputation significant risk to their firm.
outperforms the industry’s. Executives may have
confidence in the effectiveness of current efforts l Nonetheless, a lack of understanding
to improve adherence to ethical standards, but and communication between departments
consumers remain unconvinced. The industry was continues to be the norm. Many argue that
voted the least trusted by the general public in ignorance was a key contributor to the global
the 2013 Edelman Trust Barometer. financial crisis: managers signed off complex
products they did not understand, while HR
l …but executives struggle to see the benefits departments agreed to incentives they did not
of greater adherence to ethical standards. realise encouraged risk-taking. Five years after
While respondents admit that an improvement in the crisis not much seems to have changed: 62%
employees’ ethical conduct would improve their say that most employees do not know what is
firm’s resilience to unexpected and dramatic happening in other departments. Over one-half
risk, 53% think that career progression at their (52%) also say that learning about the role and
firm would be difficult without being flexible performance of other departments would be the
on ethical standards. The same proportion least helpful to improving their performance.
thinks their firm would be less competitive as a
consequence of being too rigid in this area. Less Senior executives need to ask whether the
than two-fifths (37%) think their firm’s financials power to influence at their firm is shared widely
would improve as a result of an improvement in enough. The ultimate question for financial
the ethical conduct of employees at their firm. It services firms is: who is, or who should be, in
seems that, despite the efforts made by firms in charge—the bankers, the traders, or those
recent years, ethical conduct is yet to become a support departments that keep risks in check,
norm in the financial services industry. such as human resources, compliance and risk?
The challenge for firms is to form enduring
l To become more resilient, financial services
partnerships between functions to ensure that
firms need to address knowledge gaps. The
the firm is run by experts in everything it does.
increasingly complex risk environment has
A number of firms, including ones interviewed
made advancing and updating knowledge of the
for this report, are already bringing together
industry crucial for those working in or serving
different functions to vet big, important
the financial services industry. Nearly three-
decisions concerning the firm’s future and to
fifths (59%) of respondents identify better
ensure a coherent culture and approach to risk.
knowledge of the industry as the top priority for

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 A crisis of culture Valuing ethics and knowledge in financial services

Introduction

In search of culture and financial institutions fixated on return on

equity—encouraging them both to chase revenue
In many cases and to keep capital levels modest to increase
Pre-tax profits at the world’s 1,000 largest banks
there is no surged by almost 150% between 2000-01 and
profitability. In the short term, the effects were
such a thing 2007-08, according to the magazine The Banker,
dramatic. But the focus on boosting profits
rapidly was not sustainable, and eventually led to
as a single as firms borrowed heavily to boost profits.1
a global financial crisis in 2008.
culture within Financiers also devised new techniques, such
as securitisation, that allowed lenders to sign Financial services firms are working hard to
a bank apparently lucrative deals and then sell on the change the pre-crisis culture. But for change
risk. Martin Wheatley, the chief executive of to permeate throughout the firm could
Andre Spicer, professor of the Financial Conduct Authority (FCA), the UK’s take years, if not decades. In fact, since the
organisational behaviour, industry regulator, sums up the problems that fed crisis emerged, there have been a number of
Cass Business School
the crisis as a collision between financial services scandals in the financial services industry. For
employers incentivised to increase sales volumes instance, Europe’s biggest bank, HSBC, paid

Table 1: Top ten bank fines

Fine Bank
US$1.9bn HSBC, money-laundering lapses
US$1.5bn UBS, Libor-rigging
US$920m JPMorgan, trading scandal
US$780m UBS, aiding tax fraud
US$667m Standard Chartered, breaching sanctions
US$619m ING, breaching sanctions
US$612m RBS, Libor manipulation
US$550m Goldman, misleading investors
US$536m Credit Suisse, breaching sanctions
1
“The Future of Finance: The US$500m ABN Amro, breaching sanctions
LSE Report”, A. Turner et al, US$451m Barclays, Libor manipulation
London School of Economics
Source: The Telegraph, September 19th 2013.
and Political Science, 2010.

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 A crisis of culture Valuing ethics and knowledge in financial services

penalties worth a total of US$4.2bn in 2012, “In many cases there is no such thing as a
split between US$2.3bn in compensation for single culture within a big bank,” says Andre
mis-selling financial products in the UK and Spicer, professor of organisational behaviour at
a US$1.9bn fine for lax money-laundering London’s Cass Business School. “Often entire
controls in the US. Senator Carl Levin, the teams were lifted from outside institutions as
chair of the US Senate Homeland Security and a bank expanded into new areas, especially in
Governmental Affairs’ Permanent Subcommittee investment banking. This is not just a question of
2
“HSBC exposed US on Investigations, described HSBC’s compliance the split between investment and retail banking
financial services to culture as “pervasively polluted”, which had ethics and culture. It’s that institutions operate
money laundering, drug,
exposed the US financial system to “a wide as a bunch of separate silos, each one with their
terrorist financing risks”,
Permanent Subcommittee
array of money-laundering, drug trafficking and own different cultures and operating practices.”
on Investigations, US terrorist financing risks.”2 HSBC’s experience is
Homeland Security and a sobering reminder that avoiding a repeat of the Like many other banks, from its compatriot RBS
Governmental Affairs, July crisis is not a simple or quick task. to BBVA in Spain, Barclays bought into new
2012. geographical markets as well, paying handsomely
3
The London Inter-bank
Lost identities to buy a big presence in countries from South
Offered Rate (Libor), a
benchmark interest rate,
Much of the criticism directed at the financial Africa to the US. The result, as condemned by
is calculated using a services industry has centred on culture. The the Salz Review, was a bank that was too big to
“trimmed” average of rates wave of mergers and acquisitions (M&A) that manage and a complex corporate culture that
submitted by individual swept the industry before the crisis left behind made controlling risks problematic.
banks at 11 am London time a number of convoluted firms. Barclays, for
based on their perceived
instance, bought its way into investment banking “The dilution of bank culture, and the leaching of
unsecured borrowing costs.
Allegations surfaced in
through a series of acquisitions. In 1986 it aggressive investment banking values into more
2012 that a number of large bought De Zoete & Bevan and Wedd Durlacher conservative fields such as retail can be traced
banks had manipulated to merge with Barclays Merchant Bank to form right back to Big Bang,5 and wider financial
their rate submissions to BZW. In 1996 BZW was merged with another services liberalisation around the world in the
boost profits. acquisition, Wells Fargo Nikko Investment 1980s and 1990s,” says Mr Spicer, in comments
Advisors, to form Barclays Global Investors. broadly echoed by many of our interviewees.
4
Salz Review: An
Independent Review of And in 2008 Barclays expanded its presence in
Barclays’ Business Practices, global investment banking by buying the North How the other half bank
A. Salz, April 2013. American assets of the collapsed US household Emerging markets were only lightly hit by the
name Lehman Brothers. banking crisis. Now, however, fears are mounting
5
The Big Bang was a period
of deregulation for the UK’s When the Libor-rigging scandal broke in that Asia, in particular, could face systemic
securities market starting in 2012,3 the board of Barclays commissioned problems as its banks develop and grow more
October 1986. As part of it
an independent external review of the bank’s aggressive. In October 2013 the rating agency
the London Stock Exchange Standard & Poor’s (S&P) warned in a statement
was privatised, which led
business practices, headed by Anthony Salz.
The review said: “We believe that the business that “a regional banking crisis isn’t out of the
to a number of changes,
including automation of practices for which Barclays has rightly question.”6 In particular, it worries that slower
trading and firms being been criticised were shaped predominantly economic growth could lead to a rise in bad debts
allowed to operate in a dual by its cultures, which rested on uncertain in both China and India, with China’s unregulated
capacity, as both brokers
foundations.” As a result, the review called for shadow banking sector a particular concern.
and dealers. “Years of very rapid credit expansion ... along
“transformational change”. “There was no sense
of common purpose in a group that had grown with a strong increase in housing prices, is set to
6
“Don’t rule out an Asia
banking crisis, S&P says”, E. and diversified significantly in less than two backfire on banks’ asset quality, profitability and
Curran, Wall Street Journal, decades,” concluded the review.4 possibly liquidity,” the agency warns.
October 2013.

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 A crisis of culture Valuing ethics and knowledge in financial services

So far, tight state regulation has avoided the comprehensive review of their culture and
excesses of banks in developed markets in places practices, often emphasising the need to
like China and India. To avoid future problems, prioritise customer service over short-term
they should perhaps look at the example of profits. These are thorough-going exercises as
Australia, which weathered the global crisis financiers spend time and money on deciding
successfully after tightening regulation massively who they are, what they do, and how they should
following a big scare in the 1990s.7 do it.

Steven Münchenberg, the chief executive of the How far such thinking has filtered down the
Australian Bankers’ Association, points to two ranks of financial services workers remains open
things that prevented the collapse of any major to question. A recent survey by the Financial
Australian bank during the crisis. The first was Services Authority, the former UK regulator,
the very tight regulation after the problems of found that junior retail banking staff were still
the 1990s, which meant that “regulators were incentivised to sell maximum volumes, rather
crawling all over our banks”, preventing too than to make risk-return calculations.9 “And
much risk-taking. The second was the fact that this isn’t a question of the big earners,” says
7
Australia went through
banks, the government and the regulators were Mr Wheatley, “but of people earning a modest
a period of deregulation able to talk openly and trustingly about what amount, say £20,000 a year and chasing another
in the mid-1980s, which was happening during the global financial crisis. £5,000 in bonus payments.”
increased competition Another factor, as explained in 2009 by Ian
between financial services MacFarlane, a former governor of the Reserve As Robert Potter, the chairman of the City
firms as they chased rapid HR Association in the UK points out, reform
Bank of Australia, was the effective bar on the
balance-sheet growth.
four big Australian banks merging or being taken in the financial services industry ultimately
Deregulation led to strong
credit growth secured over by each other, which prevented the mass means “hiring a different sort of person”, quite
against increasingly of mergers and acquisitions that so diluted the apart from a deep reorganisation. Changing
overvalued assets. As culture of banks in Europe and the US.8 Australian behaviour means ensuring that all staff members
interest rates rose and banks still made mistakes (including buying US understand the broader picture of banking and
commercial property values ethics, as well as their immediate roles. And this
mortgage derivatives). But they did not make
fell in 1989, the risky nature
them on a scale that might have led to their needs to start in the top echelons of the industry,
of the loans that had been
paid out became evident. collapse. where culture often comes from.
The Australian financial
services industry saw In the next two chapters we explore two of the
individual losses exceeding Time to change building blocks of culture in financial services:
AUS$9bn between 1990 At a top management level, banks from ethics and knowledge.
and 1992. The Australian Barclays to Goldman Sachs have launched a
Financial System in the
1990s, M. Gyzicky and P.
Lowe, Reserve Bank of
Australia, 2000.

8
“Four Pillars policy our
shield against crisis”, J.
Durie, and R. Gluyas, The
Australian, March 2009.

9
“Guide Consultation: Risks
to customers from financial
incentives”, Financial
Services Authority,
September 2012.

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 A crisis of culture Valuing ethics and knowledge in financial services

Rebranding Goldman Sachs

“It was a wake-up call,” says E. Gerald Corrigan, But the review also highlighted some of the
managing director at Goldman Sachs, when tensions faced by big investment banks such
describing the US$550m fine the firm was as Goldman Sachs. Alongside a commitment
issued by the Securities and Exchange to prioritise customer service and behave
Commission (SEC) in 2010 for misleading ethically, the bank still lists the commitment
investors about a product tied to subprime to maximise shareholder returns, for example.
mortgages. “The reputational damage required A 2011 survey of 200 of the bank’s biggest
great attention which we attempted to address clients found that some of them thought it
through the Business Standards Committee placed its short-term interests above those of
report (BCS).”10 its clients. Some clients also thought the bank’s
involvement in proprietary trading actually put
Goldman’s reaction to the SEC fine was to launch it in conflict with its own customers. As a stock
a fundamental review of its business practices exchange-listed company it has little choice
and culture, which US firms are required over this, but the tension between maximising
to publish. Many people blame the shift in short-term performance and maintaining a
Goldman’s culture on two things. First, after the partnership’s long-term view remains.
bank moved away from its partnership status
in favour of a stock exchange listing in 1999, it There is little doubt that the review is a sincere
encouraged a more short-term, profit-centred effort at change, with senior managers going
approach. And second, its 1990s decision to on compulsory courses to make them think
grow in size to avoid being overshadowed by the about the ethics and big decisions, including
likes of JP Morgan. That led to a number of deals involvement in any deals worth more than
marked by conflicts of interest: for example, US$850m, now vetted by a committee including
in its work on private equity deals Goldman functions such as HR and risk, as well as the
advised both the buyer and the target company. heads of the various business units. Mr Corrigan
acknowledges the desire to return to something
The effort going into the review was akin to the old, long-term focused partnership
extraordinary, says Mr Corrigan, consuming model (pointing to the risk committee in
between one-third and one-half of the time support). But how long it will take to mend the
of the firm’s 400 partners over a three-year damage done to Goldman’s reputation remains
stretch. The result of the BCS was a set of 39 open to question.
recommendations, published in 2011.

Goldman Sachs to pay

10 “

record $550 million to

settle SEC charges related to
subprime mortgage CDO”,
US Securities and Exchange
Committee, July 2010.

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 A crisis of culture Valuing ethics and knowledge in financial services

1 Ethics in the firm

Chart 1 of dollars and the effective collapse of many

institutions during and since the crisis (see chart
Which of the following would benefit the most by an 1).
improvement in the ethical conduct of employees at your firm?
(% of respondents) Ethical conduct might still not be an entirely
natural fit with financial services, where over
Firm's ability to withstand
unexpected and dramatic risks 56% one-half (53%) say that career progression would
be tricky without being “flexible” over ethical
Firm's revenue and
market share 30% standards; this rises to close to three-quarters
(71%) of investment bankers taking the survey.
Firm's profitability 7% Across regions, North American and Asia-
Pacific respondents tend to agree, while 52% of
There would be no benefit 3% Europeans counter the claim. Rigid adherence to
ethical standards would also damage the firm’s
competitiveness, say 53% of respondents.
Other 3%
Note: percentages were rounded up and may not add up to 100%. Bringing out the best
Source: The Economist Intelligence Unit.
Although there is tension between the
importance of ethical conduct to financial
Financial services executives appear to recognise
services executives and the barriers ethical
the importance of ethical behaviour. Nearly all
standards can create for career advancement
(91%) of the respondents to our survey say that
and competitiveness, financial firms have been
ethical conduct is just as important as financial
trying to work on restoring integrity in recent
success at their firm. A similar proportion (96%)
years. Less than 1% say that their employers have
say that they would prefer to work for a firm with
done nothing to improve adherence to ethical
a decent reputation for ethical conduct. The great
standards over the past three years. Just over
majority (91%) also agree that aspiring to a set
two-thirds (67%) say that their firms have made
of globally recognised standards would make the
staff more aware of the importance of ethical
industry more resilient.
conduct over that time, and more than two-fifths
There is a weaker consensus among executives have introduced or strengthened ethical codes
on the benefits of adhering to a code of ethical (63%) and the system for evaluating conduct
conduct. Over one-half (56%) say that stronger (61%) (see chart 2).
adherence to an ethical code of conduct would
improve their companies’ ability to withstand More than two-fifths (43%) of respondents’ firms
unexpected shocks. But just 37% of respondents have introduced financial or career incentives
think that better ethics would mean better for respecting the ethical code of conduct, to
financial results, despite fines totalling billions counter criticisms that bankers have become

9 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

Chart 2 for adhering to ethical standards, compared with

one-third from retail banking. Noticeably, only
What steps, if any, has your firm taken over the last three years 37% from Europe have been given financial or
to improve employees' adherence to ethical standards across
career incentives to be ethical, compared with
the firm?
Select all that apply 50% in Asia-Pacific and 43% in North America.
(% of respondents)
The use of such an instrument does raise
Raised awareness of the questions about how much banks have changed
importance of ethical conduct 67% their ways. If pay packages since the crisis have
by all employees
Introduced or strengthened a become more closely aligned with encouraging
formal code for ethical conduct 63% a risk-averse culture and ethical conduct among
Introduced or strengthened the financial services employees, then that could
system for evaluating employee 61% go some way towards making the industry as a
conduct
whole safer. However, it does beg the question
Introduced financial or
career incentives 43% of whether the use of incentives means that
financial services executives have a tendency
Other 1% to flout codes of ethical conduct, and whether
My firm has taken no steps to ethical conduct will ever become a norm among
improve adherence to ethical 1% financiers rather than a goal.
standards
Source: The Economist Intelligence Unit. Happy-go-lucky or simply deluded?
The jury may still be out on whether the financial
more motivated by incentives than good conduct. services industry has seen real change. But the
Again, the proportion increases as you go up the industry’s confidence does not waver when it
risk—and confidence—ladder, and well over half comes to its record on ethical conduct. Perhaps
(56%) of investment bankers can get a reward as a result of the action firms are taking, nearly

Chart 3 Chart 4
Rate the financial services industry’s In your personal view, how does your
current reputation for ethical conduct firm’s current reputation for ethical
in your personal view conduct compare with the rest of your
(% respondents) industry?
(% respondents)

3%
Worse

14%
Negative

26%
About the same

27% 59%
Neutral Positive
71%
Better

Source: The Economist Intelligence Unit. Source: The Economist Intelligence Unit.

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 A crisis of culture Valuing ethics and knowledge in financial services

three-fifths of the executives surveyed (59%) say reputation stands in stark contrast to the 2013
that the financial services industry has a strong Edelman Trust Barometer, an annual survey of
reputation on ethical conduct (see chart 3). And global consumer sentiment which found that
three-quarters (71%) say that their firm has an financial services was the least trusted of all
even better reputation than the industry norm industries, ranking well below technology, the
(see chart 4). automotive sector, telecommunications and
the media. Only 46% of Edelman’s respondents
The contrast in attitude between different sectors trusted financial service providers to do the right
of the industry and regions stands out. Less than thing; the proportion was higher (61%) among
one-half (49%) of asset managers reckon the respondents in Asia-Pacific, but lower (29%) in
industry has a positive reputation, as against the EU (see chart 5). Nearly two-fifths (59%)
70% of investment bankers. Europeans come of respondents familiar with the banking and
across as quite uncomfortable too. Only 31% say financial services scandals say that “the biggest
they have a good reputation on ethical conduct cause” was internal factors, such as a bonus-
among external stakeholders—a much lower driven corporate culture, conflicts of interest and
proportion compared with 53% from Asia-Pacific corporate corruption.11 Financial services workers
and 51% from North America. are more confident that the problems have been
11 Edelman Trust Barometer, solved than their customers, it seems.
January 2013. Investment bankers’ confident opinion of their

Chart 5
Financial services industry is the least trusted to do the right thing by general public
(% of respondents)

73%
70%
66%
62% 62% 62% 61% 61% 60% 60%
57% 57%
55%
Consumer electronics manufacturing

54%
51% 50% 49%
46%
Consumer health companies
Consumer packaged goods
Aerospace & defense

Telecommunications
Food manufacturing

Financial services
Brewing & spirits
Pharmaceuticals
Food & beverage

Metals industry
Entertainment
Automotive
Technology

Chemicals
Energy

Banks
Media

Source: Edelman Trust Barometer, 2013.

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 A crisis of culture Valuing ethics and knowledge in financial services

Changing tracks at UBS

It all seemed such a sound idea back in 1998, to outside investment funds and some to the
when Union Bank of Switzerland merged with Swiss government (which subsequently sold
Swiss Bank Corporation (SBC) to form UBS, a on a convertible bond issue for a profit). Some
new giant of Swiss banking that dominated the of UBS’s reactions have been predictable, for
local retail market as well as global investment example, slashing its investment banking arm
banking and wealth management. Why, by around two-thirds and banning activities
then, did things go so badly wrong with this such as proprietary trading. However, its moves
powerhouse in the crisis? And what can be done post-crisis amount to a deep rethinking, and
to sort out the mess left by a flawed giant that not just to cutting out the bad bits.
needed a big helping hand from the Swiss state?
Simply put, UBS has redefined itself around
The simple answer is that investment banking wealth management and introduced structures
was allowed to dominate group activity, which to ensure that its various divisions, from wealth
led to massive losses: UBS was a heavy buyer of and asset management to retail and investment
US sub-prime mortgage-backed assets, leading banking, work together for its clients’
to losses totalling US$50bn during the crisis. benefit rather than operating as separate
Many blame the investment banking problems silos. Investment banking is still regarded
on a clash of cultures between the two merged as necessary, providing a source of detailed
banks, both of which had bought their way into research and product development. But its role
investment banking before 1998. has been cut back to those activities that feed
the other areas.
In 1995 SBC had bought one of the largest
London investment banks, SG Warburg, and in Almost more strikingly, there has been a much
1997 a similar institution on Wall Street, Dillon wider reassessment as the bank rediscovers
Read, to become one of the biggest dealmakers its wealth-management mandate. Wealth
in the world. That was a bad fit with Union Bank managers and even retail staff have been
of Switzerland’s acquisition in 1986 of Phillips retrained to focus on advisory services, rather
and Drew, a relatively conservative London than on selling products. Even the Swiss retail
stockbroker, wealth manager and hedge fund, network has been revamped, as UBS accepts
along with similar firms in Germany and the US. both that its home market remains core and its
buildings had become a little old-fashioned for
The two very different cultures on the modern tastes.
investment banking side never truly merged,
feeding bad decision-making. In 2007 UBS It is a thorough and ongoing exercise, and
was the first bank to announce losses from the there are signs that UBS is mending some of the
US sub-prime mortgage crisis. It had set up damage to its reputation. As well as improved
an internal hedge fund through its subsidiary financial results, it announced in July 2013
Dillon Read, which invested its own and that it had regained its title as the biggest
clients’ money in complex mortgage derivative wealth manager in the world, growing assets
products. That fed UBS losses of US$17bn in by 9.7% to US$1.7trn.12 It is a sign that trust is
2008, the largest in Swiss corporate history. returning. But UBS remains not only a powerful
12
“UBS Leapfrogs Bank example of the damage wrought by pre-crisis
of America to Top Wealth As the losses mounted, UBS was forced into a risk-taking, but also a rare example of a Swiss
Manager Rank”, G. Broom,
series of capital-raising measures, some sold private bank that lost its way.
Bloomberg, July 2013.

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 A crisis of culture Valuing ethics and knowledge in financial services

2 Safety in knowledge

Although nearly all (97%) respondents are regional and national, regulation of the finance
confident that they are well qualified for their industry.
job, our survey finds a tendency for financiers to
specialise. When asked how they could perform These findings must give rise to concern,
better in their job, two-thirds say that learning considering the litany of complaints of how
ignorance drove the financial crisis. Managers
signed off on
Chart 6
complex investment
Are you confident in your knowledge of the following: products they did
(% of respondents) not understand. HR
departments waved
Competitive landscape Regulatory environment
for my firm for the financial through pay packages
services industry that they did not realise
were structured to
In the country
88% I am located 89% encourage risk-taking.

In the region Respondents to our

45% I am located 41%
survey agree that
knowledge gaps, such
14% In the world 12% as not knowing what
other departments are
Source: The Economist Intelligence Unit.
up to, can increase risk
levels: six out of ten
respondents say that their firm faces a serious
about issues directly affecting their role would
threat from gaps in employees’ knowledge. Nearly
be most helpful. However, learning about other
three-fifths (59%) of respondents accept that
departments in the firm would be the least
better industry knowledge is crucial to making
helpful activity. In fact, over three-fifths (62%)
their firm more resilient to risk, and essential
report that their colleagues know very little of
to understanding an increasingly complex risk
what is happening in outside departments.
environment. Closing knowledge gaps among
13
“More cuts to take UK financial services executives could make the
financial job losses to
And while they may be confident in the
industry as a whole safer.
132,000”, M. Clinch, CNBC, competitive and regulatory environment in their
January 2013. own country, their confidence drops significantly
when asked about their region and conditions Losing control?
14
“Financial sector job cuts around the world (see chart 6). This is despite Efforts to improve knowledge among financial
announced: 200,000”, S.
the much-discussed globalisation of financial services employees can be challenging. Dramatic
Hyman, Bloomberg, January
2012.
services and attempts at global, as well as cost-cutting since the onset of the global

13 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

Chart 7 his own firm’s survival of the crisis in part to

its development of very sophisticated systems
Top five reasons to improve knowledge of the financial services industry in-house. In other words, if processes such as
(% of respondents)
credit vetting are being increasingly automated
Increasingly complex risk and outsourced, the parent bank had better
environment 50% keep a very close eye on both the risks it is
Increasing role of technology running and on how those decisions are being
and automation in finance 42% made. According to 42% of financial services
executives, the increasing role of technology
Globalisation of
financial services 39% and automation has made updating knowledge
of their industry crucial (see chart 7).
Specialisation of job skills 31%
Bob Gach, Accenture’s head of capital markets,
Customer dissatisfaction 25% makes the argument that big firms like his own
can develop a depth of expertise in the areas
Source: The Economist Intelligence Unit. they cover and develop the systems to make sure
that financial services firms obey, for example,
financial crisis has seen hundreds of thousands risk parameters strictly. “But it’s for the bank
in the sector lose their job: since the fourth to manage its business, set its risk appetite
If you’re going quarter of 2008, 132,000 jobs have been lost in and oversee its client service,” he says. Prasad
to outsource, the UK, and 380,000 in the US.13 In 2011 more Chintamaneni, the global head of banking and
than 200,000 job cuts were announced in the
you need to be financial services at Cognizant, an IT services and
financial services industry globally, with most consulting firm says that financial services firms
darned sure of them taking place in 2012 and 2013.14 As are implementing significant technology and
the company firms shed employees, they rely more heavily on process changes to evolve a more holistic view of
knows what outsourcing partners to carry out processes that a bank’s global risk across its entire operations.
were previously handled internally. That places
it’s doing a heavier burden on remaining staff to control
“Clients, counterparties and investors simply
didn’t realise the level of risk exposure Lehman
the activities of outside companies on which they had through over-leverage,” he says of the US
E. Gerald Corrigan, managing increasingly rely. investment bank that collapsed in 2008. “The
director, Goldman Sachs
current risk-related regulatory compliance
As part of the research conducted for this report,
initiatives and the overhaul of risk management
the EIU surveyed executives working in firms that
applications and processes at banking and
support the financial services industry, ranging
financial institutions endeavour to mitigate any
from business processes outsourcing companies
recurrence of Lehman-like market crises.”
to legal firms. Remarkably, opinion among
these respondents was split exactly in half on Realistically, with claimed cost savings of up
whether employees have a basic understanding to 50% on offer for some back-office services,
of the financial services industry. Only 28% according to Mr Gach, financial companies will
report a good or excellent level of knowledge of continue to use outsourcing more heavily as
the industry, and just 24% say employees have tighter regulation makes capital, and cash,
a good grasp of the regulations affecting the harder to find. Big banks have been looking at
financial services industry. it for many years with increasing numbers of
mid-sized institutions taking a closer look more
“If you’re going to outsource, you need to be
recently.
darned sure the company knows what it’s doing,”
says Mr Corrigan of Goldman Sachs, who credits

14 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

3 Reincorporating culture

Once firms list on a stock exchange, they tend Pictet has managed to continue expanding since
to focus on short-term results, driven in part by then, using its core private banking skills to
quarterly reporting requirements and in part expand its presence in asset management. Like
by the proliferation of short-term investors. many of the Swiss private banks, it remains a
In the years leading up to the global financial partnership at the group level, although this has
crisis many banks, encouraged by their stock become trickier as a result of regulatory changes.
exchange-listed structure, pursued short-term
profits, which contributed, some argue, to the In many ways, the most telling point about Pictet
Partnerships severity of the 2008 meltdown. is that it was offered, and declined, the complex
investment products that proved unsound,
must take a In the past, however, a partnership structure was from collateralised debt obligations (CDOs,
long-term view much more commonplace in the financial services the US mortgage derivatives that made wobbly
by definition industry. “Partnerships must take a long-term sub-prime debt seem safe) to Bernard Madoff’s
view by definition,” says Jon Terry, the global pyramid scheme that offered apparently high but
head of PricewaterhouseCooper’s HR Consulting safe returns to investors. It turned them down
Jon Terry, global head of Practice. “Senior staff tend to be more focused because they were not transparent enough, or
PWC’s HR Consulting Practice
on their longer-term success, including their own because the sums did not add up (as at least one
retirement prospects, than on the short-term financial analyst told the Securities and Exchange
results encouraged by listed companies’ quarterly Commission about Mr Madoff’s scheme back in
reporting requirements.” 1999).

Many of the institutions that weathered the

global financial meltdown either adhered to a Sharing power in financial services
partnership structure, such as Pictet, a large Swiss It would be unrealistic for large multinational
wealth manager, or found ways to emulate it, such banks, such as Barclays, to return to a
as Goldman Sachs (which gave up its partnership partnership model. But one very concrete
status when it listed on the stock exchange in question to ask in this context is who controls
1999). Others have made a long-term view an the bank: investment bankers, retail bankers or
integral part of the running of the bank, such as those departments that keep risks in check, from
Handelsbanken in Sweden, which does not set its human resources to compliance and risk? If such
branches sales or financial targets but has grown support departments have no say over setting
consistently for 40 years (see box: Keeping it policy, then risks can quickly get out of control.
simple).
This is an area at which many financial
In Switzerland, none of the members of the institutions are looking hard, and where the
Swiss Private Bankers’ Association hit trouble most convincing solution might be to bring back
as a direct result of the crisis, according to the some of the practices that worked well from the
association’s general secretary, Michel Derobert. partnership model. According to Mr Derobert,
15 © The Economist Intelligence Unit Limited 2013
 A crisis of culture Valuing ethics and knowledge in financial services

the ultimate responsibility for human resources which has operated in the same way since 1970.
usually lies with the bank’s senior partner. However, Spain’s BBVA does seem to prove
Choosing the right people is one of the best ways that it is possible to forge a coherent entity
to ensure continuity of culture. Goldman Sachs, a from a muddle of mergers, acquisitions and
partnership until its stock exchange listing, has international expansion.
introduced a management committee to vet big
decisions, in a bid to ensure that departments “We’re a retail bank,” says Juan Ignacio Apoita,
such as risk and compliance have the same say BBVA’s global HR director, “and our focus remains
in decision-making as the heads of the various squarely on our retail and corporate customers.”
business units. And like Goldman Sachs, BBVA has set up a
management committee mixing the heads of
“The real challenge is not just to ensure that specialisms such as HR and IT with the heads of
non-banking staff understand finance,” says the business units to ensure a coherent culture,
Peter Cheese, the chief executive of the Chartered and approach to risk, across the group. Financial
Institute of Personnel and Development, “but education is taken very seriously, with the bank
to ensure leaders of the business, whether home to its own university, Campus BBVA.
their roles are in HR, IT, or more core banking
functions, are taking genuinely shared The strategy has worked well enough for BBVA,
responsibility for the purpose, culture and formed from the merger of various Spanish banks
strategic direction of the business.” In other through 1999, to avoid the worst of the crisis. It
words, these departments need to work in did take a hit from the collapsed Spanish property
partnership together over running the bank. market and accepted funds from a Brussels-led
That is a big organisational shift. It also means bail-out of the country’s banks, but it avoided
that financial services staff need a much wider collapse. Mr Apoita points out that BBVA lost
understanding of their employer, and the market share to more aggressive Spanish rivals
industry, to juggle risks and returns effectively, during the pre-crisis property boom, suggesting
and certainly to manage companies. that some sanity remained over lending policy.
And since the crisis the bank has expanded
successfully into the US and Latin America as
Out of the chaos
it grows international revenue. “We have the
Cost cutting, M&A, increasing automation—none
systems and the structures to ensure that foreign
of these fits well with the need to foster a single
subsidiaries follow bank policy,” says Mr Apoita.
culture at firms. Ideal solutions are tricky to find,
certainly beyond the likes of Handelsbanken,

16 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

Keeping it simple
There are a plethora of differences between Handelsbanken’s success might take too long
Handelsbanken and mainstream banks, to show in financial results for there to be any
according to its CFO Ulf Riese, which taken realistic chance of a stock exchange-listed bank
together mean not that it is risk-averse, but following its lead. But it does show two things.
that its whole ethos is about long-term returns First, that banks can reinvent themselves:
rather than short-term profits. First there is Handelsbanken introduced its present system
its profit-sharing scheme, Oktogonen. If the in 1970 after several scandals broke when it
bank makes a return on equity (ROE) above was operating as a normal universal bank in the
the annual average of its peers, then every 1960s. And second, that a localised approach
employee receives an equal share of the profit. such as this avoids many of the problems that
But this is only payable at the age of 60. The blighted banks in the US and Europe.
bank has beaten its ROE target for every one
of the past 41 years. And an employee who has “Everything revolves around our clients,” says
been in the scheme from the start can now Mr Riese, “and so if things aren’t useful to them,
expect a pay-out of more than £1m. we don’t do them.” That is why it avoided the
very complex derivatives products that caused
“This is one of the keys to us taking a long-term such problems in the US and elsewhere. And
approach,” says Mr Riese. The other is that that is why it was never tempted to use its small
“the bank is the branch”. Branch managers investment banking division for proprietary
are allowed a remarkable degree of autonomy, trading that would have endangered the bank
having complete authority within their own itself.
area over everything from marketing spend to
credit decisions. That is a big contrast to many In many ways that is also the message from
universal banks, which are tending to centralise Pictet. One of Switzerland’s older private
to cut costs. This localised approach explains banks, it has expanded rapidly by using its
many of Handelsbanken’s apparently eccentric core wealth management skills to expand its
practices, from refusing to set financial and presence in asset management, continuing
sales targets for branches to having no central to attract new money even after the crisis. Its
marketing budget. senior partner, Jacques de Saussure, credits
much of that resilience to its partnership
The important point is that it has worked, structure, “which means we must have a
allowing Handelsbanken to survive the global long-term outlook”. In fact, it has recently
financial crisis without help, as well as Sweden’s incorporated many of its business units to
own serious banking crisis in the 1990s. In satisfy new regulatory requirements, but its
fact, Handelsbanken has had the world’s best- holding company remains a partnership. And, in
performing shares since 1900: £10 invested an echo of Handelsbanken, it avoids aggressive
then was worth £20m by 2009, with very low bonus payments for most of its staff, just as it
bad debt levels and a business that has grown spurns acquisitions in favour of organic growth.
15
“Handelsbanken is impressively since the crisis. It has expanded “Taking over another company can cause
championing an old way of fast in the UK, growing its network in the problems with company culture,” says Mr de
doing new UK business”, Saussure.
country from 60 branches in 2008 to 161 in
H. Wilson, The Telegraph,
August 2013.
2013.15

17 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

Conclusion

Emerging from the global financial crisis, the financial services A number of deep-rooted tensions, however, will make
industry recognises the importance of creating a universal, creating a strong culture a big challenge for the industry
resilient and pervasive culture based on integrity and mutual over the coming years. While executives champion ethical
understanding. At an industry level, there is little doubt that conduct, they struggle to see the benefits of greater
sincere attempts are being made at change. Industry bodies adherence to ethical standards, reporting that, in reality,
are teaching non-banking staff about financial products and it can hamper career progression in the industry as well as
client needs, and bankers about ethics. And many big banks the firm’s competitiveness. Also, few see knowledge of other
have launched large-scale exercises to identify and mend their departments and functions as crucial to improving their
culture and practices to avoid the scandals that have continued everyday performance, even though a lack of communication
to erupt since the crisis. and understanding between functions is often quoted as a
factor of the financial crisis.
Both our survey and our interviews indicate the industry has
the willingness to change. There is a widespread belief in the The pressures firms faced before the global financial crisis—
importance of ethics among financial services employees, with such as quarterly reporting requirements and pleasing short-
both anecdotal and quantitative evidence of steps being taken term investors—will not go away anytime soon. But it is clear
to improve adherence to ethical standards. Executives also that the financial services industry is trying to mend its ways.
report a basic level of understanding of the industry among The key will be to overcome the basic tensions that continue
employees at all levels. They feel prepared for their current to riddle the industry, and over time see whether the top
role, and see learning about issues that are relevant to their echelons are doing enough to foster a strong, risk-proof and
everyday job as a priority to improve performance. Finally, client-serving culture at their firms.
they recognise how a stronger adherence to ethical standards
and greater knowledge can be beneficial to their firm’s ability
to withstand risk.

18 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

Appendix

The Economist Intelligence Unit conducted a Please note that not all answers add up to 100%,
global survey of 382 financial services executives either owing to rounding or because respondents
and 50 executives from firms that support the were able to provide multiple answers to some
financial services in September 2013. Our sincere questions.
thanks go to all those who took part in the The following charts represent responses from
survey. financial services executives only.

In which of the following industries, if any, do you work?

(% respondents)

Asset management
18
Commercial banking
16
Retail banking
15
Insurance/reinsurance
12
Private banking
11
Fund management
11
Investment banking
9
Wealth management
8

19 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

What are your firm's annual global revenues in US dollars?

(% respondents)

US$10bn or more
17
US$5bn to US$10bn
7
US$1bn to US$5bn
15
US$500m to US$1bn
12
US$250m to US$500m
19
US$100m to US$250m
25
US$50m to US$100m
2
Less than US$50m
4

Which of the following best describes your firm's total assets under management?
(% respondents)

Greater than US$500bn

9
Between US$250bn and US$500bn
6
Between US$100bn and US$250bn
7
Between US$50bn and US$100bn
7
Between US$10bn and US$50bn
19
Between US$1bn and US$10bn
27
Between US$500m and US$1bn
16
Between US$100m and US$500m
8
Less than US$100m
0
Not applicable/I don't know
1

Rate the financial services industry’s current reputation for ethical conduct on a scale of 1 to 5, where 1 is Poor and 5
is Excellent
(% respondents)
1 Poor 2 3 Neutral 4 5 Excellent

Your personal view

3 11 27 45 14
Among external stakeholders
7 15 34 37 7
Among employees
1 7 44 38 9

20 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

Compared to the rest of your industry, how would you describe your firm’s current reputation for ethical conduct?
(% respondents)
Worse About the same Better I don’t know

Your personal view

3 26 71
Among external stakeholders
4 42 54
Among those in the industry
2 53 44 1

What steps, if any, has your firm taken over the last three years to improve employees' adherence to ethical standards across
the firm? Select all that apply
(% respondents)

Raised awareness of the importance of ethical conduct by all employees

67
Introduced or strengthened a formal code for ethical conduct
63
Introduced or strengthened the system for evaluating employee conduct
61
Introduced financial or career incentives
43
Other
1
My firm has taken no steps to improve adherence to ethical standards
1

Which of the following would benefit the most by an improvement in the ethical conduct of employees at your firm?
(% respondents)

Firm's ability to withstand unexpected and dramatic risks

56
Firm's revenue and market share
30
Firm's profitability
7
Other
3
There would be no benefit
3

To what extent do you agree or disagree with the following statements?

(% respondents)
Strongly disagree Disagree Agree Strongly agree I don’t know

Ethical conduct is as important as achieving financial success at my firm

2 6 59 33 1
The ethical standards that my firm claims to uphold publicly are the same as employees are expected to follow in practice
1 6 56 38
I would prefer to work for a firm that has a good reputation for ethical conduct than for a bigger or more profitable firm with questionable ethical standards
2 2 41 55 1
It is not realistic for everyone working in the financial services industry to adhere to ethical standards at all times
10 41 42 7
It is difficult to make career progression at my firm without being flexible on ethical standards
12 34 46 71
Being too rigid over ethical standards will make my firm less competitive
8 39 45 81
In the financial services industry, it is more important to ensure business practices are legal rather than ethical
13 55 25 71
Aspiring to a globally recognised set of ethical standards would make the financial services industry more resilient
2 6 60 31 2

21 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

How would you describe your firm's performance in doing the following over the next two years?
Rate on a scale of 1 to 5, where 1 is Poor and 5 is Excellent
(% respondents)
1 Poor 2 3 Neutral 4 5 Excellent I don’t know

Maintaining highest ethical standards in the pursuit of business goals

2 5 34 44 15
Putting clients' interest ahead of self-interest
2 3 26 53 18
Promoting mutual understanding among employees across all levels and functions in the firm
3 3 28 51 14
Investing in the training and education of employees
2 5 34 47 11 1

How confident, if at all, are you that if you take action against or report unethical behaviour by any of your colleagues you will
have the firm's full support? Rate on a scale of 1 to 5 where 1 is Not at all confident and 5 is Very confident
(% respondents)

Not at all confident

3
(2)
3
Neutral
28
(4)
40
Very confident
25

Improvement in which of the following among your firm's employees is currently the most important priority for your firm?
(% respondents)

Understanding of your firm's business goals and values

35
Managing client relationships
31
Technical knowledge of their own function
20
Internal communication with and understanding of other departments and functions
10
Understanding of how the finance industry as a whole works
4

In your opinion, improvement in which of the following among your firm's employees is most likely to lead to better financial
performance?
(% respondents)

Managing client relationships

33
Understanding of your firm's business goals and values
26
Technical knowledge of their own function
24
Internal communication with and understanding of other departments and functions
10
Understanding of how the finance industry as a whole works
6
Other
1
None of the above
1

22 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

Which of the following is the most helpful to your ability to perform your role?
(% respondents)
The most helpful The least helpful

Knowledge of your firm's products and services

18
30
Knowledge of your firm's strategic objectives and performance
38
7
Knowledge of risks affecting your firm
31
11
Knowledge of role and performance of different departments within the firm
13
52

Which of the following is the most helpful to your ability to perform your role?
(% respondents)
The most helpful The least helpful

Knowledge of how the industry works

17
28
Knowledge of competitive landscape
17
20
Knowledge of regulatory landscape
11
30
Knowledge of economic environment
19
15
Knowledge of risks affecting financial services industry
37
7

To what extent do you agree or disagree that your previous knowledge and experience have prepared you fully for your current
position?
(% respondents)

Strongly disagree
1
Disagree
2
Agree
41
Strongly agree
56
I don’t know
1

Which of the following, if any, is currently a priority for you to perform better in your role?
(% respondents)

To improve knowledge of issues directly relevant to my own role

66
To improve knowledge of issues concerning other functions within the firm
23
To improve knowledge of the industry as a whole
11

23 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

Which of the following do you think would help you the most in advancing your career in the financial services industry?
(% respondents)

To improve knowledge of issues directly relevant to my own role

22
To improve knowledge of issues concerning other functions within the firm
41
To improve knowledge of the industry as a whole
37

Which of the following do you think would help the most in improving the resilience of your firm?
(% respondents)

To improve knowledge of issues directly relevant to my own role

8
To improve knowledge of issues concerning other functions within the firm
32
To improve knowledge of the industry as a whole
59
Other (please specify)
1

To what extent do you agree or disagree with the following statements?

(% respondents)
Strongly disagree Disagree Agree Strongly agree I don’t know

Employees across all levels in my firm share a basic common understanding of how the financial services industry works
2 20 60 18
Employees across all levels in my firm share a basic common understanding of regulation affecting the financial services industry
3 14 60 22 1
Employees across all levels in my firm share a basic common understanding of the risks facing the firm
3 26 60 11

In your own opinion, which of the following factors makes it most crucial for those working in or serving the financial services
industry to improve or update their knowledge of the industry? Select up to three options
(% respondents)

Increasingly complex risk environment

50
Increasing role of technology and automation in finance
42
Globalisation of financial services
39
Specialisation of job skills
31
Customer dissatisfaction
25
Cultural differences between different countries/markets
24
Growth of outsourced services
19
Negative public image of financial services industry
15
Avoiding high profile scandals
11

24 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

To what extent do you agree or disagree with the following statements?

(% respondents)
Strongly disagree Disagree Agree Strongly agree I don’t know

Gaps in employees' knowledge is a significant risk for my firm

6 33 50 11 1
Most employees at my firm know very little of what goes in departments other than their own
3 35 53 9

Under each column indicate whether you are confident in your knowledge of the following
(% respondents)
In the country I am located In the region I am located In the world

Competitive landscape for my firm

88
45
14
Regulatory environment for the financial services industry
89
41
12

Which of the following best describes your job title?

(% respondents)

CFO/Treasurer/Comptroller
18
VP/Director
17
Divisional president or head
14
Manager
9
Regional president or head
8
Chief risk officer
6
Chief investment officer
5
CEO/President/Managing director
5
CIO/Technology director
4
Chief operating officer
3
Other C-level executive
3
Chief of human resources
2
Board member
2
Chief marketing officer
2
Other senior executive
2

25 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

In which country are you personally located?

(% respondents)

United States of America

12
United Kingdom
11
Australia
8
Switzerland
8
India
8
Canada
8
Hong Kong
8
Germany
7
China
6
Mexico
2
South Africa
2
Italy
2
France
2
Singapore
2
Denmark
1
Finland
1
Netherlands
1
Spain
1
Sweden
1
Belgium
1
Malaysia
1
Portugal
1
Austria
1
Czech Republic
1
Iceland
1
Norway
1
Russia
1
Thailand
1
Turkey
1
Other
4

26 © The Economist Intelligence Unit Limited 2013

 A crisis of culture Valuing ethics and knowledge in financial services

In which of the following regions does your firm operate? Select all that apply
(% respondents)

Europe
61
Asia Pacific
58
North America
44
Middle East
22
Latin America
21
Africa
15

In which region are you personally located?

(% respondents)

Western Europe
40
Asia-Pacific
34
North America
20
Latin America
2
Middle East and Africa
2
Eastern Europe
2

In approximately how many countries does your firm operate?

(% respondents)

1
37
2–5
28
6 – 10
13
11 – 15
4
16 – 20
2
21 – 25
3
26 – 30
3
31 +
10

27 © The Economist Intelligence Unit Limited 2013

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organization is a champion for ethical behaviour
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investors’ interests come first, markets function at
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