Comment: Hard yards for banking standards board

Martin Flanagan
Martin Flanagan
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THE former CBI director-general Sir Richard Lambert wants the banking industry to be encouraged, over time, to develop along the lines of a profession, like accountancy or the law. I am glad he included the crucial words “over time” in terms of pragmatic expectation.

For cultural and financial reasons, banking has seemingly developed instead over many decades rather as a mixture of on-the-wing intelligence, financial inventiveness, investment banking greed and shoddy high street customer service.

With scandals ranging from Libor-rigging to the mis-selling of payment protection insurance, the industry has often seemed a mixture of the slack and the feral.

It is a big, if desirable, ask for the industry to suddenly start operating to the generally higher professional standards of M’learned friends and the accountancy number crunchers.

Andrew Tyrie MP, who chaired the Parliamentary Commission on Banking Standards, has already said such a project could take a generation to create a new credible standards body.

However, having said that, Lambert is probably correct in surmising that, while the overall objectives may not be realised for a longer period, if the initiative does not gain real traction in two or three years, it will wither on the vine.

Lambert, also a former editor of the Financial Times, and charged by the banks themselves last year with independently coming up with ways for the industry to clean up its act, says a new banking standards board should be at the heart of the reform.

He says the board needs to be run by non-bankers and focus on banks’ business culture including ethics and bonuses, their training and qualifications, and their treatment of customers. And, interestingly, banks will be benchmarked publicly against each other in these areas.

They are laudable aims and often slip under the radar of hard-pressed regulators. As Lambert identifies, for the new banking standards board to gain public credibility it will need to have an independent board, even if it is paid for by the banks, with representatives from consumer bodies, small businesses and bank employees.

Gravy train with some passengers ejected

Plus ça change... Barclays chief executive Antony Jenkins has made Project Transform his pole star for the bank’s revitalisation, but a new major jobs cull and the bonus pot up 10 per cent to almost £2.4 billion for 2013 shows the stubborn DNA of the industry.

Hence the challenge to restoring public trust in the sector (above item). What’s interesting is that, as part of up to 12,000 global job cuts, more than 800 “senior managers” at Barclays are to go.

What on earth were all these people doing if you can lose them down the back of the sofa without any impact on the profitable and consumer-centric performance of the bank?

And, on bonuses, Jenkins saying we have to pay competitive rates to keep premium talent may have some practical justification in the way the banking world still operates but had the feel of “here’s a response we prepared earlier”. Situation normal.