The banning of Paul Flowers, the former chairman of the Co-operative Bank, has also been criticised because it came more than four years after a sex and drugs scandal and his removal from his role. 

The investigations were seen by some as the watchdog dragging its feet, in a return to 'soft touch' regulation.

In a speech at the FCA’s Transforming culture in financial services conference he said: ‘The role of regulation in culture is not to attempt sweeping rules, but rather to use rules and supervision to create the right incentives and to provide tools to diagnose the key characteristics. And, we can prompt and persuade. 

‘On the role of reward, as I have discussed it, is another influence to create the right incentives for good culture.’

In 2015, the FCA handed responsibility for its work on culture to its supervision department.

The move was not designed to soften stance on ensuring good culture, said Bailey.

‘Work on firm culture is naturally embedded in the work of our supervisors, for whom it is an important priority. It has been pursued diligently by supervision ever since, and will continue to be so, and today’s conference and the publication are a part, but only a part, of our work,’ he explained.

‘There are important elements of culture that are outside most of the direct influences of our rules. We do expect people to come to work and follow good values without needing to make a rule to require it.’

However, despite this change, Bailey pointed to new rules as having meaningful effects on achieving improving culture in financial services.

These include the senior managers regime, applied to banks currently and soon to all financial services companies, and rules around financial remuneration.

‘The basic principle of the senior managers regime is that of responsibility and accountability. A senior manager has to take responsibility for the activities under their control. Likewise, they should be accountable for that responsibility. These concepts – responsibility and accountability - are disarmingly simple and direct.  But such things tend to be the most powerful,’ he said.

‘In my view, over the last ten years we have seen a major change in attitudes to, and the operation of, remuneration in banks. Early on, I was told quite often that deferral would not be accepted and would fail as a policy. I have not heard that refrain in recent years, which in itself illustrates that cultural values and attitudes of this sort do change quite quickly.’

Bailey's comments come after the regulator published a series of essays explaining how it is attempting to change culture within the financial sector.