The Teller Window
A view into the work of the New York Fed

« | Main

May 15, 2024

Ten Years of Governance and Culture Reform: Taking Stock

The New York Fed convened its first event focused on culture in the financial services industry 10 years ago in the wake of the global financial crisis. The conference took place against a backdrop of low public trust in the industry after a series of scandals, including predatory lending, rogue trading, and rate rigging. Participants sought to understand the cultural drivers of misconduct and inspire positive change.

That event launched the New York Fed’s Governance and Culture Reform initiative, an effort we’ve supported on multiple fronts over the past decade. In that time, we’ve hosted a public dialogue with nearly 200 experts across disciplines and industries, including bankers, regulators, organizational psychologists, anthropologists, neuroscientists, and even a NASA flight director. Through conferences, workshops, roundtables, webinars, and podcasts, we have explored questions such as the role of senior management in shaping culture; how structural changes to the industry impact norms; the ways in which technology is shaping norms and behavior; and how to build cultures of curiosity and learning.

The 2024 Governance and Culture Reform Conference, which will be held at the New York Fed on May 21, is the latest chapter in this effort. The event will feature Morgan Stanley Executive Chairman James Gorman speaking from his perspective as an industry leader. Ray Dorado, senior deputy superintendent for the Banking Division at the New York State Department of Financial Services, will discuss how he approaches culture change and how the department is addressing questions of character in the industry. Forensic accounting expert Kelly Richmond Pope will talk about why misconduct persists, and financial regulation expert Joseph McGrath will offer his suggestions for how the industry could improve norms of accountability and enhance incentives to internalize risk.

The conference will center on what has changed about governance and culture in financial services, what hasn’t, and what aspects of behavior and culture the industry should focus on going forward.

Ahead of the conference, we spoke with three experts who have been part of the conversation from the start: Ben Gully, deputy superintendent for supervision at Canada’s Office of the Superintendent of Financial Institutions (OFSI), who offers a supervisory lens; Luigi Zingales, a professor of entrepreneurship and finance at the University of Chicago Booth School of Business, who provides an academic view; and Stuart Mackintosh, executive director of the Group of Thirty, who provides an industry perspective.

On Changing or Standing Still

On the question of whether anything has changed, the group had mixed views.

“I remember when we were debating whether or not to write our very first report on conduct and culture 10 years ago,” Mackintosh said. “We had a whole discussion…about whether, when we were looking at the board oversight and supervision of major financial institutions, we should have a chapter on culture. There were some that said it’s too soft and difficult to get your hands around.”

He continued, “I think it shows how far the community has come…to get to a position where it’s understood what you mean when you talk about conduct and culture.”

From the supervisory perspective, Gully was more circumspect. “I think the articulation of desired culture behaviors is a work in progress,” he said, adding that discussions on culture too often default to vague and undefined corporate values. “I think you have to pick out very specific aspects of culture to get traction—it should be tightly defined,” he said.

Zingales portrayed the last 10 years more starkly.

“There was clearly a huge reaction and soul searching following the financial crisis,” he said. “And I think that since then, everything has reverted back to the mean.”

He attributes this to a failure to hold individuals accountable for their actions. “The best way to restore trust is to show that actually, people who make mistakes are paying the cost of these mistakes,” he said. “Responsibility is so diffused that nobody is taking it.”

Accountability and Incentives: Tools to Internalize Risk

All three said accountability measures and incentives to internalize risk are a continuing challenge that’s yet to be solved.

Gully highlighted accountability regimes in various jurisdictions, such as the Senior Managers and Certification Regime in the U.K. and the Financial Accountability Regime in Australia, which he said have been “quite helpful in honing incentive structures and thereby affecting the important role and profile of effective risk management.”

Still, Gully said, there are limits to what can be achieved because the calculus for a financial institution remains fundamentally different from the priorities of bank regulators. While bankers remain focused on profits, regulators are working to avoid externalities, such as the drags on economic growth associated with bank failures.

Similarly, Mackintosh questioned the extent to which a firm can develop norms that internalize the need to limit outsized risks in the face of hefty profits. “It’s still a question whether senior managers can ask the hard questions of overperforming risk-takers who are making lots of money, to make sure that that kind of performance is purely based on exceptional performance and behaviors,” he said.

Zingales offered advice for addressing weaknesses in accountability: “I do believe that a fish gets rotten from the head, and so do financial institutions,” he said. “So, if you want to fix them, you have to fix the head now. Politically, it’s more costly—it’s much easier to fire a bunch of low-level employees than to change things at the top. But that’s what needs to be done.”

Opportunities and Challenges

Looking ahead, Gully suggested that supervisors should emphasize the more tangible components and influencers of culture at firms, in addition to accountability, incentives, and internalization of a broader set of risks.

He noted that Canada’s OSFI focuses on three specific tenets of behavior. To create a foundation, the desired culture and behaviors should be purposefully designed and governed, through clear accountability and oversight, he said. Second, the desired culture and expected behaviors should be promoted and reinforced through incentive structures such as compensation and performance management. Third, culture risks should be identified and proactively engaged, managed, and discussed, like other risk categories.

Gully also recommended the supervisory community pay close attention to governance on the extreme ends: very large institutions that are “too big to get their arms around the risks and decisions” and small institutions that he said may lack “a critical mass of scale in order to get expertise and capabilities, particularly where the velocity of risk is as high as it may now seem to be.”

“There’s much more unpredictability,” Gully said. “The growth of non-financial risks has really inserted itself quite profoundly amongst capital and liquidity issues. The diversity and scale of risk has changed, and the velocity as well. We’re moving from stated theory and stated wisdom on [financial] strength to a need for a capability set and culture that can adapt, evolve, and endure.”

Mackintosh emphasized that, if cultures are to strengthen, persistence will be key. “Improving culture isn’t a singular deliverable that you pursue and then consider done,” he said. “It’s something that is embedded within the firm, aligned within the firm, and part of how the firm does business.”

“Leaders have to exhibit the culture they want to have produced in the firm, and they don’t just do it once—they do it again and again,” he said. “Repetition matters, and it may be annoying that you have to keep repeating yourself. But let’s face it, the turnover rate of employees in major financial institutions is quite fast. So, if you’re going to embed a culture, you have to keep pushing and keep repeating and adjusting it for new realities and new business models and new approaches.”

We look forward to continuing these discussions at this year’s conference as we continue to explore the drivers of culture.

If this content relates to your work and you’re interested in joining the event live, please email Following the event, a replay of the conference will be available on the event page.

Toni Dechario leads the Awareness & Dialogue 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.

Articles on the Teller Window focus on the people and programs that help the New York Fed support the U.S. economy. They are written for a wide audience with the aim of illustrating what we are doing and why it matters. Stories include editorials, interviews, explainers, and reports on events and trends in our communities and region. The Teller Window is edited by the Communications and Outreach Group on behalf of the New York Fed. Separately, for analysis from New York Fed economists working at the intersection of research and policy, please see Liberty Street Economics.

The New York Fed began publishing on the Teller Window in November 2022. Articles with dates earlier than November 2022 were originally published by the New York Fed on Medium.

Step up to the Teller Window to learn more about the New York Fed’s work and views.