THE Governor of the Bank of England has called on all banks operating in the UK to back new efforts to drive up standards of behaviour and competence in the banking industry, but warned that integrity “must come from within”.
The Banking Standards Review Council will work with banks and building societies to define standards of good practice and help asses how well they are doing in meeting them.
Banks taking part in the voluntary initiative will commit to a programme of continuous improvement in culture, competence and customer outcomes and report publicly on their progress each year.
The reputation of the banking industry is in tatters after a series of self-inflicted scandals including the rigging of benchmark interest rates, allegations of foreign exchange market manipulation and the mis-selling of useless and toxic products.
Mark Carney said: “We need a financial system that is safe, fair and acts with integrity. The Bank of England is doing its part to ensure safety and soundness.
“Integrity however cannot be regulated. It must come from within.”
He hinted at tougher regulation if bankers fail to clean up their act.
“Only exemplary behaviour can confer the social licence necessary to be active participants in ensuring that the UK banking system remains a global good and a national asset,” said Mr Carney.
The council will be launched later this year and follows recommendations from an industry-commissioned review into banking standards led by Sir Richard Lambert, the former director general of the British Confederation of Industry.
Sir Richard said: “The council will be driven from the view point of customers and of the wider group of stakeholders with an interest in the British banking system.
“Rebuilding confidence and trust in the banks is especially vital in the UK, because of the size of the banking system and the importance to the economy of London’s role as an international capital
The council could agree procedures including whistleblowing protocols, banks’ processes for handling small businesses in distress, the governance of conflicts of interest in capital market activity and the management of high-frequency trading.
Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander and Standard Chartered - the six banks and one building society that commissioned the review - said they welcomed the recommendations and promised to undertake them quickly.
A spokesman for Yorkshire and Clydesdale Banks told The Yorkshire Post: “Building trust, confidence and fairness for customers is at the heart of our approach.
“We are supportive of the principles of the Banking Standards Review Council and improving standards right across the industry can only be a good thing for customers.”
He added that the Australian-owned lenders helped shape Sir Richard’s proposals by contributing to the consultation exercise.
The British Bankers’ Association welcomed the setting up of the council as “an important step in the road to rehabilitating the UK’s banks”.
Anthony Browne, chief executive, said: “Changing the culture of an industry will not happen overnight but the focus on transparency and regular progress reports will help to drive improvement.”
Hilary McVitty, head of external affairs at the Building Societies Association, said keeping and growing customer trust has long been at the centre of what building societies stand for. “But you can never take your eye off the ball,” she added.
“We are pleased that Sir Richard has recognised that to be successful this new body must work across a huge range of organisations from large investment banks to small building societies, sensibly accommodating them all.”
The financial services industry supports an estimated 128,000 jobs in Yorkshire.