Bank of England head says banks must change culture
Bank of England governor Sir Mervyn King has called for a change in the banking culture, saying that customers have received "shoddy" treatment.
He added that bank leaders had "let down" the many honest and hard working people in the financial sector.
Sir Mervyn's comments come on the day banks were found to have mis-sold financial products to small businesses.
It is the third major scandal this year, following manipulation of lending rates and loan insurance mis-selling.
Speaking at the launch of the Bank's twice-yearly Financial Stability Report, Sir Mervyn demanded immediate and far-reaching action to reform the structure and culture of the UK banking industry.
He said: "That goes to both the culture in the banking industry and to the structure of the banking industry, from excessive levels of compensation, shoddy treatment of customers, to deceitful manipulation of one of the most important interest rates and now this morning to news of yet another mis-selling scandal.
"We can see we need a real change in the culture of the industry. And that will require two things. One is leadership of an unusually high order and changes to the structure of the industry."
End Quote Simon Walker Institute of Directors
As well as ripping off their customers, they have also harmed the reputation of business as a whole - they should feel deep shame for the damage they have done”
His comments were echoed later by the Prime Minister, David Cameron, who said at the EU summit in Brussels: "British people are crying out for a return to good old-fashioned banking... and not put that at risk by big investment banking.
"That's why the governor is so in favour of changing culture at the banks and so am I."
Criticism from business leaders is also growing, with the head of the Institute of Directors (IoD), Simon Walker, saying in a statement: "As well as ripping off their customers, they have also harmed the reputation of business as a whole - they should feel deep shame for the damage they have done."
The IoD said there should be a clear-out of leadership in many of the banks and "new blood" brought in.
Banks have been under fire this year for:
- Mis-selling personal payment insurance to people who either did not need it, would not be able to claim on it, or did not know they had been sold it.
- On Thursday, Barclays was fined £290m for fixing a key interest rate. It is not expected to be the last to face a fine.
- And on Friday, the UK's big four banks were found to have mis-sold complicated financial products to thousands of small businesses.
There have been calls from some politicians for UK banks to be investigated in the same way as Lord Justice Leveson is looking into the media.
However, Sir Mervyn said a Leveson-style inquiry was not necessary, as the wrongdoing was plain.
"We don't need any inquiry to know what we should be doing. There must be many people who work in banking today who know that they are honest, hard-working and feel they have been let down by some of their colleagues and indeed their leaders."
He went on: "What I hope is that everyone - everyone - now understands that something went very wrong with the UK banking industry and we need to put it right."
He called for the government to implement the recommendations of the Vickers Commission on banking, which said that more risky investment banking should be separated from day-to-day banking needs of individuals and small businesses.