A new independent body to drive up standards of behaviour and competence in the banking industry is to be launched this year, following recommendations from Sir Richard Lambert’s Banking Standards Review. Called the Banking Standards Review Council (BSRC), it will be a champion for better banking standards in the UK, working with banks and building societies to define standards of good practice and helping assess how well they are doing at meeting them.
Banks participating in the voluntary initiative will commit to a programme of continuous improvement in culture, competence and customer outcomes and report publicly on their performance each year. The BSRC will also publish its own annual report setting out progress by the sector and individual banks.
The six banks and the building society that commissioned Sir Richard’s review said:
“The chairmen of Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander and Standard Chartered welcome the publication of Sir Richard’s final report. It confirms that there is a role for a new Banking Standards Review Council in restoring trust amongst customers and clients. They accept his recommendations and undertake to implement them expeditiously.”
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 Banking Standards Review Council and ratifying the appointment of the Chief Executive. This panel will have no other role or link to the Council.
Mark Carney said:
“I welcome this important industry-led initiative, and am pleased to support the establishment of the BSRC. I encourage all banks that operate in the UK, both domestic and foreign, to support this endeavour. We need a financial system that is safe, fair and acts with integrity. The Bank of England is doing its part
to ensure safety and soundness. Integrity, however, cannot be regulated. It must come from within. Only exemplary behaviour can confer the social licence necessary for our banks to be active participants in ensuring that the UK financial system remains a global good and a national asset.”
Sir Richard said:
“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.”
Sir Richard has agreed with the banks to take on the role of interim chairman until a permanent chairman is appointed later this year. Executive recruitment professionals are being approached to begin the search for a chairman and Clifford Chance is working on the legal structure of the new body.
Sir Richard said:
“It is essential that work gets underway immediately and the current momentum on setting up the new Banking Standards Review Council is maintained, in order to demonstrate to the public that the industry is fully committed to this initiative.”
Sir Richard was asked last year to develop proposals for the new body. His final recommendations follow an extensive consultation process since an initial consultation paper was published in February. Nearly 200 submissions were received in response to the consultation paper.
The Banking Standards Review* states that the prime objective is to contribute to a continuous improvement in the behaviour and competence of all banks and building societies doing business in the UK and it will act as an independent champion of better banking standards in the UK. Transparency and openness will be central to its work.
The recommendations set out in the document propose that it will do this by:
- Requiring participating banks and building societies to commit to a programme of continuous improvement under the headings of culture, capability and customer outcomes, and to report back on their performance to the public every year.
- Setting standards of good practice. That means identifying activities where voluntary standards would serve the public interest, and working with practitioners and relevant stakeholder groups to come up with agreed procedures. Examples could include whistleblowing protocols, banks’ processes for handling small businesses in distress, the governance of conflicts of interest in capital market activity, or the management of high-frequency trading.
- Publishing an annual report setting out where progress is being made both by the sector and by individual banks and building societies, and where more needs to be done.
- Having a meeting once a year with non-executive directors or, in their absence, risk or reputation committee chairs of the larger banks and building societies to discuss the institution’s progress relative to the previous year and to its peers.
- Working with the industry and its stakeholders to develop a single principles-based code of practice in alignment with the high-level principles now being considered by the regulators.
- Identifying and encouraging good practice in learning, development and leadership, with a particular focus on behaviour and ethics.
- Helping the banks to meet the obligations being placed on them by new legislation, such as the Certified Persons regime.
- Working with the professional bodies already active in the banking industry to increase the value placed on professional qualifications.
*The final review can be viewed at www.bankingstandardsreview.org.uk. Sir Richard is tweeting about the review at @richardlambert5
Background
- Sir Richard Lambert was asked in September 2013 to come up with proposals for a new organisation to raise standards in banking by the chairman of Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander, Standard Chartered and Nationwide. The new organisation would be open to all banks and building societies in the UK.
- In June 2013, the Parliamentary Commission on Banking Standards (PCBS), chaired by Andrew Tyrie MP, recommended that work to establish a professional body should begin, in order to demonstrate that commitment to high standards is expected throughout banking and that individuals are expected to abide by higher standards than those that can be enforced through regulation alone.
- Sir Richard Lambert joined the Financial Times on graduating from university, and served as editor from 1991 to 2001. He was a member of the Monetary Policy Committee of the Bank of England from 2003 to 2006, and Director General of the CBI from 2006 to 2011. He is Chancellor of the University of Warwick, lead independent executive on the Supervisory Board of the Foreign and Commonwealth Office and new Chairman of the British Museum.