Pressure to change the dynamic within the banking industry reached a new high this week, as the leader of the review into banking standards revised his initial decision to reject the proposal ñ a regulatory measure – concerning whether bankers need to take oaths or not.
Sir Richard Lambert, the former director general of the Confederation of Business Industry (CBI) is set to release a document today, entailing a previously vetoed proposal, regarding the need for bankersí to take individual oaths. This ethical focus on ethical restructuring is sure to prove controversial with figures in and out of the industry, yet has found some support from certain sectors of society.
Respublica, independent think-tank, advised that if any meaningful reform was to be espoused, the conduct, or spirit, of bankers must be addressed in addition to regulations and macroeconomic problems. That is to say, structural change could rely on the amending of human interaction within the industry as much as the economic difficulties facing bankers on a daily basis; perhaps if addressed appropriately, Respublica appear to believe the former could positively impact upon the latter.
Back in his February review, Lambert posited the need for an oath for bankers to combat corruption within the industry, yet disregarded the notion himself later on in his investigation. His subsequent report was funded by the major banking giants.
The new report has been spearheaded by renowned political thinker and head of Respublica, Philip Blond. Titled ìVirtuous Banking: Placing ethos and purpose at the heart of bankingî, the report takes an innovative approach to the address of the banking sector.
Although Blond commends governmental frugality regarding their handling of macro-economic issues in the wake of the financial crisis, he stresses the need for virtue from the bottom-up within the banking industry. This is the way, from grassroots banking, that Blond appears to believe meaningful change can be brought about. The report contains an oath which Blond argues will hold bankers to a form of social contract preventing them from adopting the nonchalant stance they took when handling saversí money pre-2008.
Though not legally binding, the oath could serve to change the entire ethos surrounding the outlook of bankers to their trade.
The oath reads: ìI will do my utmost to behave in a manner that prioritises the needs of customers. It is my first duty to provide an exemplary quality of service to my customers and to exhibit a duty of care above and beyond what is required by law.î
Modes of Scrutiny
Respublica, in todayís report, will also note the need for varied forms of scrutiny on bankers, calling for shareholders to be afforded greater powers with which to hold banks to account.
This focus on scrutiny was echoed in Sir Richard Lambertís earlier report, in which laid out the blueprints for a body primarily concerned with the ìconduct and competenceî of banks. The Banking Standards Review Council, to be created imminently, will be the prime inspecting body of the banking sector. It will take annual reports from banks which will entail detailed loan histories, profits and losses and general information on behavioural conduct.
However, the body will not have legislative authority and will be funded by banking giants from the UK and abroad.
Paul Chisnall, executive director for financial policy & operations at industry lobby group the BBA, said: ìRestoring trust and confidence is the banking industryís number one priority. But meaningful cultural change in an industry as complex and diverse as banking takes time.
ìIt may be that the new standards review body decides that some within the industry should be subject to an oath or a code of ethics. It very well could be part of the answer.î