Culture: A critical currency in Gibraltar’s financial services sector

Culture is a word we hear frequently in business circles, yet few stop to reflect on what it truly means. In essence, it refers to the shared values, attitudes, behaviours, and expectations that shape how people within an organisation think and act. It is, as one regulator described, “the DNA of a firm”.

The late cultural theorist Raymond Williams described it as one of the most complicated words in the English language—and in the context of financial services, that complexity becomes particularly evident. Despite the increasing focus on culture from regulators and firms alike, it remains a common root cause of misconduct, reputational damage, and systemic failure.

Culture featured prominently in the Gibraltar Financial Service Commission’s (FSC’s) June 2025 Insurance Market Update, where it was presented as a core business driver that affects everything from strategy to supervision. This prominence confirms that culture is now firmly in the regulatory spotlight—and it’s not going away, such that there will be greater regulatory scrutiny on conduct, governance, and the personal accountability of senior management.

Why culture matters

Culture shapes the decisions people make, often in subtle but powerful ways. It underpins the way a firm conducts its business, treats its customers and delivers on its strategy. More than that, how customers, regulators, and the wider market perceive the organisations culture will define how they interact with the business.

In today’s environment, trust is everything. Customers are more informed and more attuned to poor corporate behaviour than ever before. A firm’s culture therefore plays a key role in earning and maintaining that trust. Where culture goes wrong, we often see it reflected in conduct failures—sometimes with devastating financial and reputational consequences.

A poor culture tends to prioritise short-term financial performance at the expense of ethics, transparency, and long-term stability. Conversely, a healthy culture promotes accountability, fairness, and good outcomes for customers. It also contributes to a more motivated and loyal workforce. People want to work for organisations they can be proud of.

Ultimately, good culture is good business—and it’s a powerful form of risk management.

When culture fails: A look back

There is no shortage of examples where poor culture has led to significant failures. The 2008 global financial crisis is perhaps the most glaring. Reckless lending practices and the manipulation of interbank lending rates were not just technical lapses—they reflected deep-rooted cultural issues across the banking sector. In the UK alone, banks paid an estimated £71 billion in legal fees, redress, and fines in the aftermath.

The mis-selling of Payment Protection Insurance (PPI) and Guaranteed Asset Protection (GAP) products revealed cultural flaws in sales practices. These products often delivered poor value and involved unfair commissions. Similarly, poor claims handling practices in some Motor Trade Liability (MTL) policies, such as undervaluing settlements, further eroded consumer confidence.

Each of these examples points to a culture where profit was placed above fairness, and where oversight and accountability were lacking.

What drives culture

A number of factors influence an organisation’s culture—some overt, others more subtle. Leadership is paramount. The tone set at the top of the organisation inevitably cascades through all levels. When boards and senior executives actively promote and display ethical behaviour, transparency, and fairness, those values are more likely to take root.

Remuneration and incentive structures also play a major role. If bonuses are tied solely to sales targets or short-term financial metrics, employees may feel pressured to cut corners. Regulation, of course, exerts its own influence, particularly in shaping expectations around governance and consumer outcomes.

Governance frameworks and internal accountability mechanisms are equally important. Too often, the board’s view of culture does not align with the day-to-day reality experienced by employees and customers. When culture is not measured or monitored, warning signs are easily missed.

Finally, a focus on short-term gains—particularly at the expense of customer outcomes—is a consistent red flag. Firms that lose sight of the long-term impact of their decisions are more likely to face both regulatory and reputational risks.

What should boards be doing?

Setting the tone from the top

The responsibility for culture ultimately sits with the board. It cannot be delegated to HR, compliance, or middle management. There are several steps that boards should be taking to not only define the desired culture, but to embed and sustain it over time.

First and foremost, boards must set a clear and consistent tone from the top. This means being explicit about the firm’s values, what behaviours are acceptable (and what are not), and ensuring that this is reflected in both strategic decision-making and everyday conduct. Boards need to define the type of culture they want. This includes articulating what ethical decision-making looks like in practice and being honest about any gaps between current and desired behaviours.

Monitoring and reinforming culture

Crucially, culture must be monitored—not assumed. This involves developing relevant metrics, conducting staff surveys, and encouraging honest feedback. Culture should be a regular topic on board agendas, not an annual item or a one-off project following a compliance review. Firms should also put in place a robust whistleblowing framework, offering anonymity, confidentiality, and protection against retaliation.

Remuneration programmes should be aligned with desired behaviours, rewarding not just outcomes but how those outcomes are achieved.

Extending culture across the organisation

As more firms rely on outsourced service providers and distribution partners, and they become a critical part of how firms operate, cultural alignment across these relationships is becoming increasingly important. Regulation is currently evolving to put an ever-increasing focus on how these relationships are managed.

Training and awareness programmes can support understanding and help employees internalise the organisation’s values. These should be more than tick-box exercises—they need to be engaging, practical, and tailored to different parts of the business.

Boards should be prepared to commission independent reviews or audits to benchmark their culture and assess the effectiveness of their governance frameworks.

Ultimately, culture is a strategic priority—and boards must lead from the front.

Conclusion

Culture is at the heart of everything a firm does. It influences decisions, shapes behaviours, and determines how the organisation is perceived by regulators, customers, and employees alike.

Experience has shown us the damage that can be caused when culture is neglected or misaligned. The costs are not just financial—they include lost trust, diminished brand value, and reputational harm that can take years to repair.

Independent reviews can help Boards ensure that they have both taken the right steps to define and monitor culture, and also provide them with assurance that the day-to-day reality within their firms matches their expectations.

Regulatory focus on culture will only intensify. For firms in Gibraltar’s financial services sector, this is not just a compliance issue—it is a leadership issue. Culture must be owned by the board, embedded across the organisation, and monitored with the same rigour as financial performance or operational risk.

Because in the end, a firm’s culture isn’t just a reflection of its people—it’s a reflection of its purpose.