Releasing the Power of Team

Culture Under Regulatory Pressure

The UK financial sector enters 2026 facing a pivotal shift in how regulators view workplace culture. In December 2025, the Financial Conduct Authority finalised guidance on non-financial misconduct, confirming that serious instances of bullying, harassment, or violence between colleagues will constitute breaches of the Conduct Rules from 1 September 2026. This extends rules previously limited to banks across the broader financial services industry, encompassing roughly 37,000 additional firms under the Senior Managers and Certification Regime.

The change stems from longstanding concerns that toxic team dynamics enable misconduct, erode trust, and elevate both conduct and prudential risks. Regulators now treat psychological safety — the environment where employees can raise concerns, admit errors, or challenge decisions without fear — as essential to effective risk management. Reports highlight that poor psychological safety correlates with silenced risk escalations, reduced innovation, and higher attrition, while teams with high safety show markedly better engagement and motivation.

Real-world consequences loom large. Firms failing to prevent or address serious misconduct risk enforcement action, substantial fines, and damage to public confidence in the financial system. Senior individuals face personal accountability, with misconduct potentially affecting fitness and propriety assessments. The rules apply broadly: serious non-financial misconduct in the workplace, including at social events or shared services, falls in scope, and exceptionally grave cases may matter even if outside work if they threaten industry trust.

Less visible tensions complicate compliance. Banking's traditionally hierarchical structures often clash with the openness required for psychological safety, creating resistance to change. The push for coaching cultures to unlock team potential coincides with digital transformation and AI adoption, demanding faster adaptation and collaboration — yet over-emphasising individual sanctions risks undermining collective performance. Firms must invest in leadership behaviours, speak-up mechanisms, and consistent incentives, all while navigating the nine-month implementation window before the September deadline.

This regulatory pivot reflects a broader recognition: in an era of interconnected risks, team effectiveness is no longer a soft issue but a hard driver of stability and resilience.