After facing public condemnation and eye-watering fines for misselling products, manipulating markets and twisting tax rules, the vast majority of the UK’s financial institutions claim to have changed their ways. 

But some in the industry question whether the organisations have really altered their behaviour. Could senior staff, and those working in compliance in particular, now find themselves in the uncomfortable position of answering to two masters: their employers and the regulators?

Banks have poured money into boosting their compliance departments over the past few years, following repeated regulatory fines and blistering bad publicity. The website efinancialcareers says that compliance staff are “hot property”, able to name their price when taking on new roles.

But compliance professionals are also leaving in increasing numbers. “There’s a lot more pressure than when I first started out,” one director in compliance advisory told efinancialcareers. “Expectations are higher, visibility is greater and internal resistance to enforcement adds to the stress,” he said. 

Sir Hector Sants, former Chief Executive of the Financial Services Authority, is perhaps the highest-profile example, lasting just ten months as head of Barclays’ compliance operations before being signed off sick with exhaustion and stress. Sir Hector, who was reported to be on £3m a year, told friends at the time that he did not want to pursue any more full-time career opportunities after his time running the 1,300-strong compliance department.
“Expectations are higher, visibility is greater and internal resistance to enforcement adds to the stress”Sales incentivesThe use of commission and bonuses to incentivise financial advisers and other staff to make sales has been blamed for many of the problems that have arisen for compliance offices in financial services over the past decade. In line with all of the UK’s retail banks, Alison Brittain, head of Lloyds retail bank, overhauled sales incentives last January in an attempt to end bad sales practices. The move, which involved scrapping sales targets but retaining ‘customer needs met’ targets and introducing a ‘variable pay scheme’, followed a £28m fine for Lloyds’ high pressure sales culture and a compensation bill of more than £11bn for misselling payment protection insurance.

Just before the changes were introduced, Brittain told the Daily Mail that she was running a “clean bank”, but that the ditching of sales targets was a “last symbolic gesture” to break from its past. “No one will have any opportunity, whatever level they are, to say they were incentivised to do something wrong,” she said.

The Financial Conduct Authority (FCA) agrees that the behaviour of banks is beginning to improve. In a report published in 2014, it said: “All the major retail banks have either replaced or made substantial changes to the financial incentive schemes which played such a major role in the misselling scandals of recent years.” 

Some of those working in the industry, and the unions that represent them, believed the changes made to performance measures were resulting in compliance and other staff coming under even greater pressure. Initially the Lloyds Trade Union said the bank was still incentivising staff to do the wrong thing. Mark Brown, General Secretary of the LTU, said: “The [new] standards are targets. Staff are being incentivised to talk about other products or services, even if they believe they are not in the customer’s best interests.”

Four months on, Brown believes the changes may be making a difference. “It’s early days, but we haven’t heard the same amount of noise about sales pressures that we used to hear,” he says.

The BBC is currently screening a series of documentaries about life in a NatWest branch. The first episode showed one member of staff describing how the ethos of senior management had changed. “When I first started working here, the mindset would be ‘Oh great, a loan’s just walked in’,” he said. “But nowadays we don’t have a target for how many loans we do. All the talk from above is about customer service.”


How one bank is helping

Despite the high-profile example of Sir Hector Sants in 2012, Barclays says rates of mental health issues are not particularly high at the bank. Nevertheless, it is proactive in promoting mental health awareness. For the past two and-a-half years, Barclays have been working with mental health charities, including Time to Change, Mind, Rethink Mental Illness and the Mental Health Foundation, to raise awareness of mental health and wellbeing. 

A spokesman says: “Our ‘This is Me’ campaign shows how people with mental health conditions have to cope not only with the illness itself but also with the way they and their illness are perceived by other people. The campaign features Barclays colleagues talking openly and frankly about their mental health, or their experience as carers.

"It’s not only important to change perceptions, but also to make colleagues who have a mental health condition aware of the resources and support that they can get from Barclays.”Pressure pointsWhile regulatory action and the change in targets seems to have relieved some of the stress felt by customer-facing staff, the benefits are not universally enjoyed by all those working for banks and other financial institutions. Anecdotal evidence suggests that fear of fines and the accompanying adverse publicity has increased the pressure experienced by those in senior management, back office and compliance roles.

A banking consultant who wishes to remain anonymous says fear of incurring the wrath of the FCA causes decisions to be delayed by weeks. “Senior managers on six-figure salaries avoid responsibility, sending decisions back up the line until someone says: ‘No, buck up and do your job’,” he says. “Heads of department prefer to engage with audit to check what they are being given by external consultants. That adds three weeks to every decision, but it’s ultimately what the FCA wants. We often have to resort to the executive board to get things done.”

He is probably not alone in thinking that money spent on compliance could be usefully deployed elsewhere – on improvements to the bank’s hapless computer systems, for example. Such beliefs, correct or not, can lead to resentment of the compliance department, and could increase the stress felt by its staff.

Risking burnoutDr Michael Sinclair, Managing Director at the City Psychology Group, said in May that there had been an increase in stressed-out compliance professionals seeking guidance and counselling. He partly blamed the rise on an increase in the workload for compliance departments without matched increases in resources. But he added that if compliance staff are viewed unfavourably within their own organisations, that will leave them feeling undervalued, reducing their career longevity and increasing burnout.

Is such resentment justified? The FCA believes that company efficiency, profitability and compliance can go hand in hand. “We don’t see it as a zero sum gain – ‘Obey our rules and you won’t make a profit’. It is not a trade off between profitability and adherence to the rules,” said a spokesman.

But the LTU’s Brown believes the move away from sales targets and therefore away from a compliance headache, could already be under threat. “The issue for the banks will come when their half-yearly results come out,” he says. “Their performance hasn’t been as good as expected. The question is, what will their reaction be to business falling off? Will this cause them to go back to their old practices? The jury is still out.”