A British parliamentary committee Wednesday recommended sweeping changes to restore public trust in the banking sector.
The committee’s report says that the ability of the sector to perform its crucial role in support of economic growth “has been eroded by a profound loss of trust born of profound lapses in banking standards.” Its proposals aim to enable trust to be restored in banking — stressing that there’s no magic bullet, and that reform across several fronts is “badly needed”.
The committee says its proposals have five themes: making individual responsibility in banking a reality, especially at the most senior levels; reforming governance within banks to reinforce each bank’s responsibility for its own safety and soundness and for maintaining standards; creating better functioning and more diverse banking markets in order to empower consumers and provide greater discipline on banks to raise standards; reinforcing the responsibilities of regulators; and, specifying the responsibilities of the government.
Among its numerous recommendations, it calls for: much more effective enforcement, including the creation of a new criminal offence for bankers that fail to carry out their professional responsibilities; a radical re-shaping of remuneration; sweeping governance reforms; much greater personal bank account portability; regulators should encourage increased competition; a shift within regulators from mechanical data collection and box ticking to a much greater emphasis on the exercise of judgement; and, greater regulatory accountability.
The UK Financial Services Consumer Panel (FSCP) lauded the report and its call for higher professional standards for bankers. “We welcome the publication of the commission’s report and support its recommendations aimed at improving the behaviour of bankers. Bankers in key positions need to have the same high professional standards as other professions such as doctors and solicitors given the devastating impact their recklessness can cause,” said Mike Dailly, consumer panel working group chair.
“We are delighted that our call for tougher professional standards has been endorsed with the suggestion of a new senior person regime and a new set of banking standards rules. Individuals are all too visible when bonus payments are handed out. They also need to be accountable when things go wrong through excessive risk taking. The recent history of banking failures demonstrates how directors have all too easily sidestepped any personal responsibility for their actions,” he added.
And, it supports the commission’s call for a new criminal offence, noting that that “new standards of conduct will not be effective unless they are backed by criminal sanctions.”
“Bankers must understand that the high levels of remuneration come with high levels of responsibility. All banking executives should demonstrate the highest levels of professional and ethical standards in line with their pay and status. Where these standards are not met they, like those in comparable professions, should feel the full weight of the law,” he concluded.
British Bankers Association (BBA) chief executive, Anthony Browne, said, “This is the most significant report into banking for a generation. There has already been a huge amount of change in the industry since the financial crisis but the banks recognize that more needs to be done. Regaining trust is an absolute priority — we want the UK’s banking industry to once again set the gold standard for professionalism and integrity.”
“We look forward to working with government and regulators to take forward the constructive proposals contained in the report, learning the lessons of recent years in order to deliver a banking industry which is trusted, financially sound and serves the interests of its customers, shareholders and society,” he added.