FOLLOWING the financial crisis and the Libor scandal, the City was seen as out of control. Britain’s global reputation for probity and integrity took a hit, much to the delight of some of our competitors. Regaining trust is an absolute priority – it is only by restoring confidence in banks that the UK’s banking industry can once again set the gold standard for professionalism and integrity.
Yesterday’s report by the Parliamentary Commission on Banking Standards marks a new phase in the debate about reforming our banking sector. The government has said it will set out how it will respond with new proposals put before parliament soon, but there should be no doubt that having high ethical standards is a competitive advantage, not a competitive disadvantage.
Britain’s legal industry is a good example – the UK has become the legal capital of the world largely because the English legal system has about the highest standards in the world. Business people everywhere trust that our lawyers and judges are free from corruption, political interference and nationalist biases. So to ensure London keeps its place as a leading global financial centre, it is crucial that we continue to reform the industry and regain trust and confidence in our banks.
For centuries, people from around the world came here to do business because they knew they would be treated honestly. The same is true now – global businesses will come here if they know they can trust the service they get. Further, we must ensure that the British public are confident that they will never again have to bail out a bank. The UK has been leading the way on this, but the pace of reform in Europe – from where the relevant legislation is coming – has been frustratingly slow. However, the end is in sight for a pan-European resolution regime. This should ensure that people can be confident in the recovery or resolution of a bank in significant financial difficulty, without taxpayer bail-out, so that we should not see a repeat of the run on Northern Rock.
It is also essential that we restore the trust between banks and their customers, so that people can be sure their bank will not try to sell them complicated products they do not need. The banks are taking this seriously, because they have an economic stake in ensuring their customers can trust them – reputational damage quickly leads to share price damage.
Accordingly, in the wake of the various mis-selling scandals, bank chief executives have been brutally frank about how the industry lost sight of the customer, and re-configuring their businesses to ensure they properly serve their customers’ interests – for example, sales bonuses are being stripped out of retail bank networks in a bid to tackle mis-selling.
The banks will work with government and the regulators to take forward the constructive proposals contained in the Commission’s report, learning the lessons of recent years to deliver a banking industry which is trusted, financially sound and serves the interests of its customers, shareholders and society.
The UK’s reputation for integrity has taken a knock. We have to restore it.
Anthony Browne is chief executive of the British Bankers’ Association.