LONDON can lay claim to be the world leader in many things. It has, for example, the world’s most popular music venue, in the O2 centre. It has the most visited modern art gallery on the planet, at Tate Modern. It is also the world’s legal capital. London rejoices in having many of the world’s biggest law firms, and its courts are brimming with international commercial cases. If a Japanese company does a deal with a Korean one, the chances are they will do it under English law, and resolve disputes in English courts.
There are two main reasons for this: English law is commercially friendly, and the English legal system has a reputation for having the highest standards in the world. Our judges, courts and lawyers are widely respected for their integrity and professionalism, untarnished by corruption, political interference, or nationalist considerations. Those world-leading legal standards are part of our competitive advantage: it means people from around the world are keen to come here to do business.
As in law, the same is true of banking – high standards (effectively implemented, without too much bureaucratic burden) are a competitive advantage. Having low ethical or professional standards does not win business but loses it, as global clients steer clear. For centuries, London has traded on its reputation for probity, with foreigners confident their money would be safe. Unfortunately, the financial crisis and the ensuing scandals have tarnished our international reputation. Lapses in professional and ethical standards clearly played their part in the troubles.
To get back on its front feet, London must reclaim the moral high ground. We need to raise – and be seen to raise – our professional and ethical standards in banking. When I made this point, giving evidence to the Parliamentary Commission on Banking Standards this week, it generated an enthusiastic note of agreement with MPs and peers.
The banks all realise this, which is why they are implementing wide-ranging programmes to raise the professionalism of their staff. We submitted detailed written evidence to parliament on how to restore confidence in the standards in the industry. One thing that is clear is that, while there is no silver bullet to achieve this, there are many opportunities for reform. First stop is strengthening the existing regulatory and legal system, like widening the FSA’s approved persons regime, and making it more visible. Another option is setting up an independent Banking Standards Review Council to raise professional and ethical standards. It could oversee an industry-wide code of conduct, applying to all employees working in banking. It would need to have teeth to be able to enforce it.
We should aim for the highest standards – setting, as it were, the gold standards in banking for the world, which others look to for inspiration. Only by doing that can London be confident it can retain its crown as the global financial centre.
Anthony Browne is chief executive of the British Bankers’ Association.