Will a ‘Banker’s Oath’ change the industry?
According to ResPublica policymakers have pursued the wrong type of reform when trying to clean up banks, focusing on regulatory issues while ignoring the “inherent lack of virtue amongst our banking institutions”.
The idea recieved another boost today, when a joint consultation published by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) proposed a set of ‘Conduct Rules’ which would take the form of “brief statements of high level principle, setting out the standards of behaviour of bank employees”.
The Banker’s Oath would play a similar role to the Hippocratic Oath in medicine, calling on individuals to “recognise the good, do the good and be good”.
But will an oath alone be enough to restore consumer faith in banks? Your Money asks the insiders.
Alex Letts, CEO and founder of Ffrees, the digital current account provider, says:
A banker’s oath feels like using a sticking plaster to repair the work of a guillotine. The issue for the banks is now beyond mending with a few words and a few headlines in the national press. Consumers deserve more than an empty promise of virtue from the banks – especially since this should’ve always been intrinsic when it comes to being responsible for something as precious as people’s finances.
The scandals which have brought the banking sector into such ill repute still aren’t recognised harshly enough in my view. Banks have colluded over fixing the interest rates so that hard-up people fighting with the recession get over-charged for their mortgages. This crime has received a slapped wrist and fines relating to about a week’s worth of the profits trousered from this fraud. Customers are beginning to understand this. Banks have been involved in everything from PPI mis-selling to years of overcharging customers for overdrafts and under-serving them. Next up, they will be in the dock for fixing currency rates. So, “I promise not to be naughty any more” seems unlikely to have much effect.
In the long run the banks should be business-to-business organisations and should not be consumer-facing. Banks should look after money, where they are trusted, and should not be allowed near customers. They should allow innovative, socially responsible, digital customer-centric companies to manage products, marketing and consumer relationships. Alternatively they need to think about new branded services operated at arm’s length. After years of disservice, customers will largely ignore any oath and look at behaviours.
Paul Chiswell, executive director of financial policy and operations at the BBA, says:
An oath is not the only way to raise ethical and professional behaviour across the industry, but it is an objective we all share. Nor is it the first time such a suggestion has been made.
Indeed the BBA looked at the possibility of introducing an oath as part of our input to the Parliamentary Commission on Banking Standards (PCBS). However, the feeling amongst many was that investing too much in a single solution might be a false summit.
Our suggestion was to create some sort of “standards council” that would work alongside banks’ senior leadership.
The proposed Banking Standards Review Council would work alongside the regulatory authorities to create a blueprint for raising standards. Crucially, this would be achieved via cultural change rather than regulatory compliance.
The industry is making strides towards meaningful cultural change and an oath may or may not form part of the answer. But it can’t be the only step and it shouldn’t be the first.