UPDATED: Banks have undergone cultural change since crisis, says Chancellor

The Chancellor Philip Hammond said the major banks had undergone a cultural change since the financial crash which is steering staff away from risky behaviour.

Chancellor Philip Hammond at Lloyds Banking Group, Halifax with Katie Green.

Mr Hammond also said that the needs of the regional financial services industry would be at the forefront of the Government’s mind in the Brexit negotiations.

He made the comments as he visited Halifax today to meet senior figures from regional professional services firms.

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Mr Hammond hosted a private roundtable at Lloyds Banking Group in Halifax and also toured the building and chatted to staff.

Speaking afterwards, Mr Hammond said he was visiting Halifax to focus on the fact that financial services is a UK-wide business.

He said: “We often talk about financial services, and people think we are talking about the City of London.

He added: “his is an industry that employs 2.2 million people across the UK in financial services centres like Leeds and like Halifax.

“More than 60 per cent of all employees in the sector are based outside London and this is a series of visits to try and get that perspective back into balance, so that as we’re thinking

about the future of the financial services business, post Brexit, (and) how we are going to regulate it; we’ve got a proper focus on the needs of the actually, much bigger domestic, UK financial services business sector and make that sure we don’t just get a London-centric view of the sector.”

Mr Hammond said that a lot had changed in the banking regulatory system since the financial crash.

He added: “The banks are working very hard to build their small business customer base and are very focused on the needs of those customers, which is a positive thing.

“But since 2010, we have had a change in the regulatory structure. We’ve had a change in the culture in the banking industry and with it a change in the way people in the industry are remunerated.

“So, there were a lot of perverse incentives in the remuneration structures pre the crisis, where people were driven to promote risky products and to indulge in risky behaviours because they were rewarded for doing so.

“Remuneration structures have come under the microscope since then and they’ve been re-organised in a way that steers people away from these kind of practices.

“Of-course a lot of institutions paid out billions of pounds of compensation for mis-selling and misleading practices.

“It will be a salutary lesson to their managers.”

Mr Hammond said The Financial Conduct Authority, working with the Bank of England, was regulating in a way which was giving confidence in financial stability and also confidence about the fairness in the way individual customers are treated.

He added: “Nothing is ever going to be perfect; there will always be cases that need to be dealt with and I hope that the FCA is agile enough to respond to the changing picture and to deal with issues, when they arise.”

He added: “I want your readers to know that we understand that the UK financial services business is a UK-wide business; that it’s got a very important footprint across the country in the regions. Financial services businesses serve the regional economy and their number one purpose is to support the real economy and businesses and consumers.

“And as we go into our negotiations with the European Union and think about our financial services industry, post Brexit, we will have the needs of the regional industry top and foremost in our minds.”

During his trip to Halifax, Mr Hammond met a number of leading figures from Yorkshire financial and professional services sectors, including Vim Maru, group director, retail, at Lloyds Banking Group, Philip Abram, a partner at KPMG LLP, Russell Galley, the managing director of Halifax Bank at Lloyds Banking Group and Andy Nelson, chief financial risk officer at Skipton Building Society.