Lambert Reveals Template For Banking Clean-Up
Banking must strive to become a profession similar to accountancy or law if its leaders are to succeed in restoring public trust, the former director-general of the CBI will say today.
Publishing a consultation paper on banking standards reform, Sir Richard Lambert will say that a new standards body should provide a "canopy" under which existing industry organisations would operate, with an over-riding priority to act in the public interest.
Heralding the creation of a new organisation that would act as "an independent champion for better banking standards", Sir Richard will point to the plethora of mis-selling and fraud scandals as evidence that the proliferation of "values statements" from banks had had little effect, according to a draft copy of the paper obtained by Sky News.
"Good behaviour will be defined at all times from the customers' perspective," he is expected to say.
His blueprint, which banks will have the opportunity to respond to during the next few weeks, amounts to a radical overhaul of the way bankers would be trained and accredited following public and political outrage triggered by the 2008 financial crisis.
"Professions such as medicine, the law and auditing all create public goods along with private benefits; they meet broad societal needs," he will say.
"It seems hard to argue that bankers do not have a similar role. A sound banking system is unquestionably a public good."
The mobility of bankers between rival institutions means that efforts by individual banks to reform behaviour are unlikely to succeed, requiring collective action to make a difference.
Sir Richard will identify the rewarding of short-term profit generations as one of the causes of the banking sector's problems, saying:
"In too many cases, industry norms have incentivised short-term revenue generation as opposed to the duty of care to customers. So long as this is allowed to continue, banking will fail in its efforts to raise standards of conduct."
The new body, which is unlikely to be operational until the end of next year, will establish behavioural standards that will apply to the global activities of UK-headquartered banks and building societies, and the UK operations of overseas banks.
Participating institutions will be required to report annually on their progress at meeting a series of undefined metrics, including: the understanding of codes of conduct by employees; conduct-related costs; incentive structures; and processes for dealing with complaints and customer feedback.
As Sky News disclosed last month, a panel of four people potentially including the Governor of the Bank of England will identify the chairman and chief executive of the new standards body.
The duo would also be held to account by the Treasury Select Committee at least once a year "in much the same way as the Health Select Committee calls in the General Medical Council on a voluntary basis", Sir Richard will suggest.
Membership of the body would initially be restricted to banks and building societies with an aspiration to extend that to individuals over time. Such a move would help to imbue bankers with a sense of professional responsibility, "making them aware of their obligations to society as well as to their manager or team leader".
Another of Sir Richard's proposals would be for a helpline to be set up to advise banking whistleblowers and industry employees seeking ethical advice.
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