Organisational Culture in UK Finance at a Crossroads: Empirical Insights and Regulatory Implications

The Financial Conduct Authority (FCA) expects from regulated financial firms to demonstrate good governance and a healthy, purposeful culture, aligning with the FCA’s objectives. These are seen as critical to financial services firms’ ability to deliver value to consumers and to support market integrity and financial stability. The FCA’s supervisory approach is framed as outcomes-based regulation, differentiated from the much-criticised principles-based approach. Yet for all its prominence in regulatory discourse, culture remains difficult to pin down in practice. It is loosely defined, hard to measure and even harder to regulate. Our recent study responds to this problem by grounding discussions of culture in empirical evidence. Drawing on 29 in‑depth qualitative interviews with senior managers, regulators and industry professionals across UK financial services, we develop a comprehensive, empirically informed typology of organisational culture. 

Our analysis reveals ways to improve culture in finance and provides recommendations for financial authorities, such as the FCA, that regulate culture to adopt a renewed approach to outcomes-based regulation. Outcomes should be more clearly defined and measured, complemented by management-based regulation and a judgement-based approach to enforcement. 

Culture as a regulatory premise

The FCA has been cautious about defining culture directly. Instead, it assesses culture indirectly through a set of ‘drivers’, including leadership, governance, people and purpose. These drivers are framed as consistent with an outcomes‑based approach to regulation, particularly under the Senior Managers and Certification Regime (SMCR) and the Consumer Duty. 

Our analysis, however, shows that the distinction between principles-based and outcomes-based regulation in this context is often blurred. While outcomes-based regulation promises flexibility and innovation, its effectiveness depends on regulators' and firms' ability to identify, assess and evidence outcomes. When applied to organisational culture, an inherently complex and contested phenomenon, this creates significant challenges. Our study seeks to bring greater clarity by giving substantive content to the regulatory language of culture, drawing directly on lived experience within the industry.

The methodology 

The study is based on 29 semi‑structured interviews conducted between 2022 and 2023. Participants included current and former senior managers in banking, insurance, asset management, payments and professional bodies, as well as regulatory staff. Interviewees held a wide range of roles, from CEOs and Chief People Officers to legal, compliance, risk and policy professionals. To analyse the dataset, we draw primarily on Charles Handy’s well‑known typology of organisational culture, power, role, task and person culture, supplemented by Hofstede’s dimensions of organisational culture. What emerges from the data is not a neat classification, but a picture of culture as fragmented, layered and often contradictory, shaped by competing internal dynamics and external pressures.

A sector in transition

One of the clearest findings from the interviews is that UK financial services are in a period of cultural transition. Interviewees consistently described a tension between an older, deeply entrenched cultural archetype and a newer, still emerging one. The older archetype is familiar: short-term profit maximisation, steep hierarchies and a close association between revenue generation and power. The newer, aspirational culture moves in a very different direction. It expresses an ambition to balance commercial success with broader social objectives, including the fair treatment of consumers, employee wellbeing, diversity and inclusion and longer‑term value creation. Yet this newer vision has not displaced the old; instead, the two coexist uneasily. Moreover, we observed that across financial firms, all four of Handy’s cultural types are present.

Power culture remains the most dominant and highly influential. Decision‑making authority is often concentrated in a small number of individuals, frequently those who generate the most revenue (rainmakers). Interviewees spoke openly about ‘star’ performers whose status shields them from challenge or discipline. While this culture enables rapid decision‑making, it also undermines accountability and allows problematic behaviours to persist. At the same time, role culture has become more pronounced in the wake of post‑crisis regulation. Highly formalised processes, manuals and reporting structures now dominate large parts of the sector, particularly in compliance and risk functions. Yet interviewees often viewed these structures as encouraging box‑ticking rather than meaningful engagement with regulatory objectives, especially in relation to SMCR.

Alongside these more familiar patterns, there are signs of change. Many firms are actively cultivating elements of task culture, emphasising collaboration, expertise and collective problem‑solving. Team-based incentives, cross-functional projects and peer-to-peer working practices were frequently mentioned, and interviewees often linked these approaches to better customer outcomes and greater organisational resilience. In contrast, the change incorporating person culture is visible but more limited. Financial firms are adopting some of the discourse of a person culture, but they do not appear genuinely committed to valuing their staff as ends in themselves, as theorised in Handy’s people culture; instead, EDI and other seemingly progressive agendas are arguably used to centralise power.

Rethinking Outcomes‑Based Regulation

The coexistence of these cultural forms helps to explain the difficulty of regulating culture through outcomes alone. Our findings suggest that the FCA’s current approach underestimates the practical challenges of outcomes‑based regulation in this space.

To begin with, we argue that the FCA must articulate concrete metrics in alignment with the drivers of culture. Such metrics would enable credible implementation of the FCA’s policy on purposeful culture and enhance its own accountability. For instance, in the context of diversity and inclusion, a key metric would be the percentage of representation of underrepresented groups (gender, ethnicity and socioeconomic background) at both senior and mid-level management. In the context of remuneration regulation, it is essential to assess the extent to which variable remuneration is tied to non-financial performance objectives, especially those tied to positive customer outcomes.

Second, outcomes‑based regulation should be complemented by management‑based guidance. This means that the FCA must provide more detailed guidance on key internal processes, including the roles of senior management and the board in fostering a healthy culture. As with other large, global corporations, large financial firms may have a senior management position dedicated to internal culture, often called the Chief People Officer. However, to be differentiated from other internal functions prescribed by regulation, such as the roles of Chief Risk Officers and internal audit, there is currently no regulatory requirement regarding the Chief People Officer. Formalising this role as a key internal gatekeeper, in tandem with audit, risk management and compliance functions, would likely empower culture champions within firms and give them the leverage to counterbalance pressures from other senior managers. Such a change will shift the internal balance of power within financial firms, moving away from a power culture, in which power is concentrated in the hands of a few senior managers, towards a role culture.

Finally, effective regulation of culture requires a genuinely judgement‑based supervisory approach. Culture cannot be captured by metrics alone; it demands substantive regulatory evaluation of organisational practices and behaviours.

Conclusion

Our study shows that culture in UK finance is neither static nor uniform. It is contested, layered and in flux. While power and role cultures remain dominant, task and person cultures are gaining ground and may offer important counterweights to concentrated authority. These findings have important implications for policymaking. They highlight that, to ensure outcomes-based regulation of culture moves beyond rhetoric, regulators must adopt a renewed approach. Outcomes should be more clearly defined and measured, complemented by management-based regulation and a judgment-based approach to enforcement.

Andreas Kokkinis is an Associate Professor at the University of Birmingham Law School.

Anat Keller is a Reader in Law at King’s College London.