(For other news from Reuters Financial Regulation Summit, clickon http://www.reuters.com/summit/FinancialRegulation16)
* Bank CEOs' conduct message not getting to rank and file
* Bailey wants shareholders to be more vocal at banks
* Bailey to bolster FCA's mission message from July
* Bailey sees more realism in bank pay, shareholder pressure
By Huw Jones and Andrew MacAskill
LONDON, May 16 (Reuters) - British bank bosses are notgetting the message through to staff about rooting out conductthat led to the financial crisis and to customers being rippedoff, Bank of England Deputy Governor Andrew Bailey said.
Many of the largest banks required taxpayer-funded bailoutsand were embroiled in scandals including mis-selling loaninsurance and complex interest-rate hedging products and riggingglobal foreign exchange and benchmark interest rates.
Bailey takes over as chief executive of the FinancialConduct Authority (FCA) after its first CEO, hardliner MartinWheatley, was ousted by British finance minister George Osborne,in a move widely interpreted as a desire to go easier on banks.
Running banks is now far more about managing changes tobusiness models than winning new clients, and although the toneof management has changed, this has not filtered all the waydown through the organisations, Bailey told the ReutersRegulation Summit.
"The big challenge for them is ... what is called bridge to engine room," he said on Monday. "How do you know whatyour business is doing?"
Bailey, whose appointment was well received in London'sfinancial circles, said the high level of complaints to theFinancial Ombudsman, and the volume of grievances beingvalidated, shows that British banking still needs reform.
MISSION TO EXPLAIN
Bailey, who takes on his new role in July, said he wanted toimprove understanding of the FCA's mission, as the three-yearold watchdog moves into a new phase of regulation following aslew of capital and conduct crises at Britain's banks.
His predecessor Wheatley had pursued a "credible deterrence"policy, inherited from past head regulator, Hector Sants, whowarned banks at the height of the financial crisis to "beafraid" of the watchdog.
"I don't make statements of the 'be very afraid' nature or'shoot first' because we are in the business of solvingproblems," Bailey said, adding that the FCA must take intoaccount "quite reasonable" objectives raised by government.
"When people talk about regulatory independence, you have toexplain it does not mean that you are on a different planet."
Shareholders also needed to become more vocal and werealready making their voices heard in relation to banker pay,where a "greater sense of realism" was now apparent.
Follow Reuters Summits on Twitter @Reuters_Summits (Editing by Sinead Cruise and Alexander Smith)