WHAT sort of banking industry do you want? Probably much the same as I do: banks that fuel economic growth, lend to businesses, let customers fulfil their dream of owning a home, and are well-financed enough to ensure that we taxpayers are never called on to provide support ever again.
Today, senior bankers will gather at the BBA’s Annual Conference to discuss exactly how we build such an industry. We may be closer to that world than many people think, but there are still many potential pitfalls in the road ahead.
There has been impressive change since the crisis. Cash bonuses to top bankers have tumbled by more than 80 per cent. Banks now hold three times as much capital as they did before the crisis. Frontline staff are now rewarded for customer satisfaction – not selling as much as possible. And we now have tough new regulators in the Financial Conduct Authority and the Prudential Regulation Authority.
But while we must learn from the past, it must not shape our future. Lingering on those mistakes could limit our ambitions.
And ambitious we should be. I am enormously excited by how mobile phones, cheque imaging and other easy-to-use technology is transforming retail banking, and at such a speed that it’s no longer hard to see a world where notes and coins become almost redundant.
I’m also excited by a new professional standards body designed to ensure bankers exhibit the gold standard for competence and ethics – an achievement that would make us a magnet to customers around the globe.
But there are threats to the future of our industry. I am particularly concerned by a phrase now heard increasingly frequently around the boardrooms of the world’s biggest banks. The word is of “de-risking”.
It relates to the enormity of fines emanating from mostly US regulators to combat money laundering, terrorism finance and financial crime having perverse, damaging effects.
The tentacles of this issue reach far and wide. It’s the reason why some businesses striving to enter new markets can’t secure the export finance they need – because their bank is obliged to know not just their customer, but their customer’s customer.
It’s the reason why money poured into collection buckets by the British public to help Syrians and Palestinians is not always getting through. It’s also the reason why some families living in the UK are not able to get money back home to sub-Saharan Africa.
Today this will be discussed at the BBA’s conference as the $100bn question – yes, the fines levied on banks who fall foul of these rules are of that order.
We must not be complacent – no industry is indestructible. There are signs that our financial services industry is slipping down the world rankings. The US recently overtook us to become the largest exporter of financial services in the world.
Now is the time to focus on our future. If you spend your time looking in the rear view mirror, you should hardly be surprised if you do not end up at your intended destination.