Alistair Milne, professor of financial economics at Loughborough University, found even apparently simple terms such as “arrears” or “loan performance” can have different meanings within the same organisation.
Milne said it could take a decade for banks to develop a common financial language, which would be used to swap information between computer systems.
“Before the financial crisis, it was hard to convince board directors to spend money on such systems,” Milne said.
“Then during the crisis banks didn’t have the cash to spend. Now that we’re beginning to see banks emerging from the worst of the crisis, this is the time for investment in this field.”
Milne added that investing money in such systems would help banks cut their costs, as well as pleasing regulators. It may also help banks identify customers more accurately, removing the need for clients to prove their identities several times to the same bank.
Andy Haldane, executive director at the Bank of England, highlighted the need for a “common language” during a speech to the Securities Industry & Financial Markets Association in 2012.
Milne said the topic is also on the agenda for the European Central Bank, the Bank of Japan and the United States Federal Reserve.
Owen Kelly, chief executive of trade body Scottish Financial Enterprise, said: “This is a live issue. But there would need to be a coming together of regulators as well as banks to agree on such a common financial language.
“Clarifying what we say within the industry would also help us when it comes to communicating with customers as well.”