A sea change for bank sector

Sir Richard Lambert will call for an independent organisation to oversee the banking industry and said that banks will have to report publicly each year on how they are performing against new rules on behaviour and competence.

The body will also assess and validate training programmes for bankers, but will fall short of calls for bankers to swear an oath similar to the Hippocratic oath sworn by doctors.

Yorkshire banks and building societies welcomed the plans.

David Nicholson, director of Halifax Community Bank, said: “The reputational impact of the financial crisis upon the banking industry’s stature has been immense.

“Rebuilding a sound reputation founded on the highest standards of responsible behaviour is key to the industry’s long-term success.

“But words alone are not enough to change public perception and regain trust. We must be able to provide meaningful commitments and allow ourselves to be independently measured against those.”

Halifax and its parent group Lloyds have laid out a series of goals under the group’s Helping Britain Prosper Plan, which promises to support over 80,000 first-time buyers in 2014 and increase net lending by over £1bn to small to medium-sized businesses in 2014.

“I believe our Helping Britain Prosper Plan measures, the first of their kind, can help deliver a positive step-change in regaining positive public sentiment and trust in our industry,” said Mr Nicholson.

Tanya Jackson, corporate affairs manager at Yorkshire Building Society, said that over the past five years consumer perception of banks and building societies has changed with many judging financial institutions as not having their best interests at heart.

“In order for the financial services sector to rebuild their relationships with customers and change those perceptions they must become more open and transparent, keep the promises and hold their hands up when mistakes are made,” she said. “Only by being open and reaffirming their commitment to customers will financial institutions make themselves more trusted to behave differently and more responsibly.”

Yorkshire Bank’s media relations director Barry Gardner said that it is only by listening to customers that it can build a better bank.

“Quite simply, this means ensuring we put the customer at the heart of everything we do,” he said.

“As part of our commitment, we continue to make a significant investment in professional standards playing a leading role with around a quarter of our staff having already achieved the Chartered Banker Professional Standards Board Foundation Standard.”

Sir Richard hopes that the new organisation will act as an independent champion for better banking standards, although he admitted that as it is funded by the industry, it might struggle to win credibility initially and would have to show from the start that it is not a lobby group for the banks.

It will have no statutory powers and will stop short of being able to take away bankers’ licence to operate, in the way professional bodies representing doctors and lawyers can.

Sir Richard, a former editor of the Financial Times, was asked to set up the body by the chairmen of Barclays, HSBC, Lloyds, Royal Bank of Scotland, Santander, Standard Chartered and Nationwide.

Under his plans the new organisation will work with banks and building societies to define standards of conduct and assess how well they are doing at meeting the standards against relevant benchmarks.

Sir Richard said: “The objective is a measurable and continuous improvement in the conduct and culture of banks and building societies doing business in the UK.

“The credibility of the new body will be built on the independence of its board, and on widespread industry participation. Its first task will be to define standards of good conduct, and to help drive these into all business activities.”

Under the plans, bankers – likely to be recently retired executives – would be on the board of the organisation, but in a minority. A panel of around four would choose a chairman and a chief executive. Sir Richard’s consultation paper said the body should not act “as an advocate for the banks”.

“Winning the confidence of the wider group of stakeholders in the banking system will be challenging, and take time,” he said.

“This will be determined by the quality and breadth of the board, and the tone it sets in public statements from the start.”

Commenting on the proposals, Matthew Fell, CBI director for competitive markets, said that restoring trust in the banking system is fundamental to the future of the UK economy.

“With its emphasis on standards and ethics, Sir Richard’s review is an important piece of the jigsaw to help reinforce a culture change that puts the customer at the heart of everything banks do,” he said.

“Transparent reporting of performance is important so that banks don’t just sign up to these new standards, but live and breathe them.”

The proposals envisage that initially it will be banks and building societies themselves that belong to the new organisation rather than their employees, but that at a later date it could act as a professional body for individual bankers. The consultation paper said the new organisation must be transparent and open in everything it does.

[email protected]