UK regulator says banks remain complacent over culture

* FCA's Wheatley says cultural change too slow

* FCA McDermott says won't back off on big fines

By Huw Jones

LONDON, Dec 2 (Reuters) - Banking is still in the earlystages of the cultural change needed to regain public trustafter a series of scandals that are already prompting customersto switch lenders, Britain's top financial watchdog said onTuesday.

Martin Wheatley, chief executive of the Financial ConductAuthority (FCA) said "culturally complacent" banks shouldrealise that customers can switch to new entrants far moreeasily now if they don't like the behaviour they see.

Banks should have "zero tolerance" for misconduct, he said.

His comments echo those from an independent think tank lastmonth which said it would take a generation to fix a "toxicculture" in banking.

The FCA fined five banks, including Britain's RBS and HSBC, $1.77 billion last month for failing to stoptraders from trying to manipulate the foreign exchange market.This followed fines for banks who tried to rig interest ratebenchmarks.

Wheatley said board members were committed to improvingstandards but the message was not reaching frontline staff atbanks and more urgency is needed.

"This is an industry that remains in the foothills ofcultural reform," he told an FCA enforcement conference.

Tracey McDermott, the FCA's director of enforcement, saidthe forex fines came despite the "PR" statements from banksfined for misconduct over a decade or more.

After each penalty, lenders were "depressingly consistent"in saying misconduct was due to a few individuals, that changeswere being made and that it would not happen again.

"Of course it did happen again," McDermott said.

The watchdog is set to clock up another record total forfines in 2014, but McDermott rejected criticism that the FCA wasa "Soviet tractor factory" hell bent on meeting penalty quotas.

The FCA was "absolutely determined" to make individualsaccountable for their decisions.

"This is vital if we are going to weed out the morallyunacceptable," she said. (Reporting by Huw Jones)