There was an interesting juxtaposition earlier this week as the CEO of the Prudential Regulation Authority, who is also the incoming Chair of the Financial Conduct Authority (FCA), Andrew Bailey, gave a speech outlining the regulator’s perspective on ‘Culture in financial services’ at City Week 2016.

As the man appointed to take forward the FCA, it was with great interest to hear his views, especially in light of a story on the same day, reported by ‘This is Money’ at the MailOnline that suggested that Lloyds sales tactics put 'customers at risk of getting products they don't need' after a warning from a trade union as it writes to Mr Bailey to raise their concerns.

In his speech, Mr Bailey was quick to point out that:

‘the culture of firms and the people that make them up… is of the utmost importance to financial regulators’ and he went on to say that ‘culture is a product of a wide range of contributory forces; the stance and effectiveness of management and governance… the structure of remuneration and the incentives it creates… and the willingness of people throughout the organisation to enthusiastically adopt and adhere to that tone.’

It will have been of comfort to consumers no doubt then that Mr Bailey recognised that:

‘Culture has a major influence on the outcomes that matter to us as regulators…[in] recent history there has not been a case of a major conduct failing in a firm which did not have amongst its root causes a failure of culture. Culture has thus laid the ground for bad outcomes.’

Interestingly, he continued:

‘It is not for us regulators to prescribe culture. Firms and their management have to want good culture. But we can have a lot of influence here.’

At the top of Mr Bailey’s in tray at the FCA will be a letter from the Lloyds Trade Union (LTU) which, according to the MailOnline story said:

'Our primary issue with the bank's minimum competency standards is that by forcing staff to push particular products, with the performance improvement process sword hanging over them in case they don't, customers could be at risk of being sold products they don't need or can't afford.

'So in simple terms, the current use of minimum competency standards by Lloyds Banking Group breaches principle 3 of the FCA's principles for business which states that: 'a firm must take all reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems'.

According to the MailOnline story, the issues have been highlighted by a whistle-blower as it states:

“Lloyds Bank staff warn they are under pressure to ply customers with ‘back door’ sales tactics in branches.”

“This is Money is still being contacted by senior branch staff members across the country who are facing pressure to push products on customers, despite the bank vowing in the past to stamp out the pushy sales culture.

“We [This is Money] have seen an internal document titled 'minimum competency standards' which appears to show how staff members are expected to sell one of each product in branch every single month.

“A whistle-blower, based in the North, told us that over a three-month rolling period, an adviser needs to hit as many of these measures as possible. Less than six and they are removed from the role and put on a coaching plan. If after three months the situation has not improved, the plan goes formal, and there is a risk from that of the adviser being sacked.

“He said: 'This is obviously unacceptable pressure, which can force advisers to push products that are not in a customer's best interests. The bank is saying that having minimum competencies shows that we can evidence to the Financial Conduct Authority that our advisers are compliantly meeting customer’s needs. However, the reality is, they are being used as a stick to bash advisers over the head with, and are forcing advisers to openly target specific products purely for "compliance" purposes, and not customer need, which, quite simply is not acceptable.'

A Lloyds Bank spokesman told the MailOnline:

'The Group does not have sales targets at a branch or colleague level, nor is a colleagues pay or bonus linked to product sales. As a customer-focused business we expect our colleagues to spend time with customers and show knowledge and expertise when helping them. It is therefore important that we have a way of ensuring that colleagues are competent and properly equipped to meet the needs of our customers. Competency standards are designed to ensure that a colleague maintains product knowledge by evidencing a customer need has been met on a rolling three-month basis. This is not a sales target and can be met by passing a product knowledge test as an alternative.'

This will be of concern to consumers across the United Kingdom, and is an issue that Mr Bailey will need to tackle at the outset of his tenure at the FCA.

As he outlined in his speech at City Week:

‘We do want senior managers to feel… responsibility in all that they do and that includes a responsibility for forming and implementing a positive culture throughout the organisation.

He further added:

‘It is not the job of regulators to enforce culture and to change culture. If we have to step in, and occasionally we do, the overriding conclusion is that the management has failed.’

However, he went on to say that:

‘The basic difference between the role of the regulator and management of firms is that our objective is framed exclusively in terms of the public interest… Firms exist to service customers who make up the public interest, which of course means that service includes the notion of not exploiting customers.’

It will therefore be of great interest to consumers and Lloyds bank staff to see what response Mr Bailey has to the letter from LTU and what actions if any he takes to back up his words delivered to City Week.