He noted that there are signs of improvement, with a number of major banks moving away from a formulaic ‘sales equals reward' approach, and also outlined the future direction the FCA's work on incentives.
"Banks, international regulators, domestic regulators - we all have a clear responsibility to work together to make sure the structures in banking that encouraged self-destructive tendencies in the past are either replaced, or modified,” he said.
"A major priority here: the issue of financial reward.
"In The Big Short, Michael Lewis uses the example of some US hospitals removing more appendixes than others because they get paid more for doing so, to underline a basic point that: ‘If you want to predict how people will behave, you look at their incentives'.
"In domestic cases like PPI this link was particularly strong so it is reassuring to see evidence of culture shift taking place.
"The FCA's on-going investigation into incentives suggests several UK banks are making strides on reforming reward structures - responding well to guidance.
"The early analysis - and I think we have to stress this is early analysis - shows three of the biggest UK banks have removed the direct link to sales in incentive arrangements for front line staff in retail branches and call centres.
"On top of this, we are seeing evidence of others moving away from formulaic incentives to a more balanced approach. And it's encouraging to see larger firms increasing tracking of customer outcomes in face-to-face sales.
"It's true some concerns remain over the use of incentives in areas like investment and protection sales. And it's also important to be clear on the scope of these early findings.
"The work has had a focus on financial incentives - bonuses and variable pay - so we're not yet looking at potential causes of mis-selling like product design, performance management, sales processes, targets and so on. All are areas that are likely to be on the radar going forward.
"But it would be churlish not to recognise progress where it is made. And this is, potentially, one of the most significant steps forward for the UK banking industry since 2008 in terms of repairing the relationship with retail customers."
