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December 6, 2022

The New York Fed’s Governance and Culture Reform Initiative: An Overview

Misconduct and poor organizational cultures in the financial industry have far-reaching and material consequences for the American people and economy. To address and help mitigate risk from misconduct and organizational culture, the New York Fed established the Governance and Culture Reform initiative, which examines how formal organizational structures and underlying drivers of individual and group behaviors impact outcomes at financial firms. This work began in the aftermath of the Global Financial Crisis, a period marked by widespread misconduct and a corresponding increase in litigation and enforcement activity in the financial industry, with scandals continuing to this day.

Why is poor corporate culture a problem? Misconduct can threaten firms’ health by diverting management attention and resources, tarnishing reputations, and depleting capital through large fines. Weak governance and culture also can encumber regulatory compliance and fuel global problems such as money laundering and terrorist financing. And if consumers were to lose trust in the banking sector, it could undermine the resilience and stability of the financial system, especially in times of crisis.

Given these factors, we believe there must be a long-term commitment within the financial industry and among regulators to:

  • reduce misconduct;
  • promote healthier organizational cultures; and
  • increase public trust in the financial sector.

Our work in this area has led us to engage with experts across a diversity of disciplines, and the prevailing understanding is that undesirable behaviors cannot simply be eliminated by fiat. Rather, old norms need to be replaced with new, more desirable norms that account for complex motivations and influences. Because we have found that there are no quick or easy answers, the initiative is designed to support continual progress toward stronger, healthier cultures in the financial services industry.

Strategic Channels

The New York Fed executes the work of the initiative via three strategic channels: Awareness & Dialogue, Education & Research, and Supervision & Governance. In each area, we aim to “move the needle” on key issues through engagement with the industry, the regulatory community, academia, and the broader public.

Awareness & Dialogue: The Awareness & Dialogue channel educates and supports a public conversation by bringing together industry professionals, academics, and experts in a wide range of fields—such as behavioral science, neuroscience, anthropology, technology, and philosophy—to explore the relationship between organizational behavior and culture. We produce conferences, webinars, and podcasts, and develop thought pieces, white papers, and speeches. This content is available on our website, along with related information from industry groups and other regulatory authorities around the world.

While the programming elements vary, we focus on several main themes each year. For example, in 2022 we highlighted issues related to the role of trust and psychological safety in organizational culture, how technology affects human interactions and how it can be harnessed in building healthy cultures, and the ways in which a shift to hybrid work affects individual behaviors and group norms.

Education & Research: The New York Fed’s Education and Industry Forum (EIF) brings together representatives from business schools and senior industry professionals to integrate ethical decision-making into the education of the next generation of the financial services workforce. The EIF’s real-world case studies highlight ethical dilemmas that early career bankers may encounter in the workplace, like trading in lightly regulated markets and the ethics of gathering and using information about current or prospective employees. The case studies and accompanying teaching guides, which are freely available, help instructors facilitate classroom discussions about how to practically address ethical issues when they arise.

Supervision & Governance: The New York Fed regularly convenes the Supervisors Roundtable on Governance Effectiveness, a forum of supervisory authorities from around the world. The Roundtable’s goal is to promote innovation and collaboration among supervisors on topics related to governance, culture, and behavior. Roundtable agencies share supervisory practices, develop resources, and engage in collective learning with academics and industry representatives. The Roundtable and its member agencies also contribute to the work of the BIS Financial Stability Institute and the Financial Stability Board on governance and culture issues.

Learn more about the New York Fed’s work on Governance and Culture Reform.

“The journey toward reforming culture in the banking and financial services industry is a long one. And there’s no single action that a regulator or a bank can take to make it happen. Getting it right is going to require the will and expertise of regulators, financial services firms, academics, and practitioners. And while changing organizational culture is a long-term, complex, and challenging task, I’m optimistic that we can and we will make progress. And the Federal Reserve Bank of New York is committed to being a partner on that journey.”

—New York Fed President and CEO John C. Williams, “Banking Culture: The Path Ahead” (June 2019)

James Hennessy is a senior advisor in the Supervision Group and head of the Governance and Culture Reform initiative.

Esra Ozer is a communications advisor in the Supervision Group.

Stephanie Chaly is a specialist in organizational culture and change in the Supervision Group and leads the Supervision & Governance channel of the Governance and Culture Reform initiative.

Thomas Noone is an attorney in the Bank Supervision and Markets division of the Legal Group and leads the Education & Research channel of the Governance and Culture Reform initiative.

The views expressed in this article are those of the contributing authors and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.


The Teller Window is a publication featuring expert knowledge and insight from the New York Fed, including thoughts and perspectives from senior leaders. It offers a deep look at issues that matter to the Federal Reserve’s Second District and the nation.

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