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LONDON (Alliance News) - Britain's biggest banks have backed the establishment of an independent body known as the Banking Standards Review Council to improve standards as the industry looks to mend its reputation, with Bank of England Governor Mark Carney set to play a major role in helping to identify the new organisation's leadership team.
The Banking Standards Review Council, which is intended to be independent of the banks despite being funded by them, will be set up later this year following recommendations by Richard Lambert, a former director general of the Confederation of British Industry. Under measures, banks will report publicly on their performance each year as they commit to a programme of "continuous improvement" in culture, competence and customer outcomes. The BSRC will also publish its own annual report setting out progress by the sector and individual banks.
To help ensure its independence, a panel of respected figures from outside the banking industry, and chaired by Mark Carney, governor of the Bank of England, will be put together for the purposes of appointing the chairman of the BSRC and ratifying the appointment of the chief executive. This panel will have no other role or link to the BSRC.
The banking industry's reputation has been tarnished by the 2007-09 financial crisis, a string of mis-selling scandals and the Libor benchmark rigging.
After receiving almost 200 responses to a consultation paper published in February, Lambert said that there is a strong case for "a collective effort" to raise standards of behaviour and competence in the banking sector, adding that the best way to deliver it is by setting up a new and
independent body.
"There are big challenges to be overcome. The new organisation will be funded by the banks, but must remain independent of them. It must cover the whole banking industry if it is to be credible, but also recognise that there is very little in common between a small building society and a large investment bank. It must complement rather than confuse the work of the regulator, and it must rely on voluntary support rather than statutory backing for its ideas," Lambert said Monday.
"The Banking Standards Review Council will be driven from the viewpoint of customers and of the wider group of stakeholders with an interest in the British banking system. Rebuilding confidence and trust in the banks is especially vital in the UK, because of the size of the banking system and the importance to the economy of London?s role as an international capital market," Lambert added.
Lambert got to work on the measures after the chairmen of Barclays PLC, HSBC Holdings PLC, Lloyds Banking Group PLC, Nationwide, Royal Bank of Scotland Group PLC, Santander and Standard Chartered PLC asked him to develop plans for a professional body to promote high standards in banking.
In a joint statement, the chairmen of the commissioning banks and building society welcomed Lambert's final report.
Paul Clark, the chief executive of Charter UK, the enterprise complaints and feedback specialist, said that the BSRC's focus on rebuilding trust in the banks is "very good news" for both customers and for banks.
"While some organisations may regard consumer protection initiatives like these as burdensome, forward-thinking firms will see the arrival of the BSRC as an opportunity to increase their customer focus and to implement business improvements that will have an immediate impact on the bottom line," Clark said in a statement.
CBI Deputy Director General Katja Hall said it makes sense for the regulatory focus to concentrate on how banks can best serve their customers.
"Sir Richard?s recommendations for banks to commit to driving continuous improvement, with transparent public reporting, alongside new good practice standards, are a sensible way forward," Hall said in a statement.
"With the political and regulatory spotlight now firmly on conduct, a swift and positive response from the banks to these proposals, combined with changes already underway, should help to rebuild trust in this important sector over time," Hall said.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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