The third of the five indicators that I flagged, back in January, to look out for in the FCA's Business Plan was clarity on firm culture. Having read the Plan I'm not much wiser than I was before, but I'm starting to think that complete clarity around something that in itself is so intangible is a false God, and that we should pursue a different route.

The quest for good culture began just after 2000, when the newly formed FSA identified poor culture as being at the core of a succession of conduct failures. In response, it placed increasing emphasis on its existing Principle for Business of "treating customers fairly". This quickly became universally  known as TCF, thereby losing a good deal of its moral force (the curse of acronyms). 

Firms accused the regulator of trying to apply new standards retrospectively, which had some justification in the precedent of the regulation but less in its spirit. They also challenged the FSA to define what it wanted firms to do, to describe "what good looks like" for TCF. There then followed a protracted dance around what evidence the FSA would expect firms to be able to show, culminating in the regulator undertaking a self-defeating assessment of firms' MI on culture.

As I've written before, this inevitably targeted process rather than outcome, which didn't make it not important, but did mean it would never be the whole answer.

The challenge today is to prevent SMCR -the regulator's latest, and much more credible, attempt to change firm culture -turning into a measurement exercise.

To be fair, the FCA has so far been consistent that it is not in the business of telling firms how to structure themselves. This is an important principle, for both regulator and firms. The next couple of years offer a critical opportunity to accept that some important parts of culture can't be measured, and that outcomes are what really matter to customers. 

This means the regulator accepting that some poor culture will persist and will result in conduct failures, and firms to take proper responsibility for bread and butter issues like accountability, good governance, managing conflicts of interest and professional competence, and treating their customers fairly. 

There will be risk management involved on both sides, but ultimately that's what financial services is about. Some of the answer will be about accepting that issues will occur, and focusing on identifying them early and fixing them fast.

The Business Plan doesn't go in this direction but it is probably too early to expect it to do so. The final SMCR rules won't be made until the summer and the regime probably won't come until after next summer. And as ever, it is how supervisors and enforcement apply it in practice that will ultimately dictate how it works. For now, constructive generalities are probably the best approach.

One last thought... Diversity and inclusion increasingly seem to me to be unavoidable parts of the cultural jigsaw. It's by no means a silver bullet for such problems as Group Think, suppression of dissenting opinions, unbalanced incentives, or a tick box mentality. But equally, it's hard to see a sustainable solution to these problems in firm culture that doesn't have D&I at its heart.