Banks don't trust themselves

Sir Richard Lambert

There is a big question begged by Sir Richard Lambert's recommendations for collective action by the banks to raise their standards of behaviour.

The point is that in coming up with a plan to create a new organisation to spur improved conduct on all banks, Lambert is responding to a request from the chairs of Barclays, HSBC, Lloyds, RBS, Santander, Standard Chartered and Nationwide.

So what is it about banks which means that, unlike supermarkets or pretty much any other industry, the banks don't believe competition provides them with enough of an incentive to behave well.

Is the problem that most of us are still reluctant to take our business elsewhere when our banks let us down - so competition doesn't operate with sufficient intensity?

Is it that so much of what they sell, both to individuals and to institutions, is so complicated and opaque, that most of the time we don't know when we're being ripped off?

Is it that the rewards in their investment banking operations are so enormous, and the pressures from testosterone fuelled managers are so great, that no human investment banker can be confident of permanently resisting the temptation to cut corners and rig markets.

One for all, and all for one

Well, the bleak truth, Lambert would concede, is that it's all that and probably more.

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There is growing political pressure for much more active engagement by regulators”

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In fact, Lambert is so persuaded that banks can't be trusted to rise phoenix-like of their individual volition from the savage bonfire of their finances and ethics that he argues there should be no bankers involved in choosing the board of the new standard setting body and that bankers should be in a minority on that board.

Also, he does not believe the new conduct monitor will succeed unless every bank of any size signs up as a member - and that includes the foreign investment banks operating in the City of London, and the new so-called challenger banks.

His fear is that unless it is one for all and all for one, banks will not force proper behaviour on their respective people, because they will always have the excuse that Mega Bank down the road is still swimming with the sharks and stealing the fastest prey and profit.

Banks' dilemma

And over time Lambert thinks there's a case for every individual banker being able to become a member of this new conduct monitor, and not just the institutions - though he baulks at doing this from day one, because of the organisational challenge of herding tens of thousands of bankers.

So here's the dilemma for the big banks if they follow through on their commitment to broadly do what Lambert proposes.

There is growing political pressure for much more active engagement by regulators in approving all products they sell and in setting prices.

Having conceded via their encouragement of the Lambert plan that the market fails to provide sufficient incentives for them to treat customers fairly and honestly, how do banks resist the argument that the market fails in other more fundamental ways too?

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 243.


    We will be leaving capitalism in the first half of the 21st century unless it is sorted out now. I take it that you are not a supporter of capitalism but just someone who is doing well now so you call it capitalism to make people think the situation is ok. You think that if you point to other people and call them socialists then no one will notice you are not a capitalist.

  • rate this

    Comment number 242.

    "no faith"
    Sadly, 'the debate' has wound-down (perhaps in despair of solution) moving-on to have (another) go at Barclays, next blog

    To have RATIONAL faith in the honesty, in the honest skill, of those we work with or must entrust, we need all agreed on equal partnership in our collective enterprise, the production of goods & services, equitably accessed by choice from secure equal incomes

  • rate this

    Comment number 241.

    I have absolutely no faith in this man changing anything, all the regulators in this country seem to be easily bought off by the industries they are supposed to regulate look at energy, banks, media. reduce their wages to £250,000 max no bonuses, if they do not like it and threaten to leave I will gladly come to London and help them pack we would be better off without those low lives.

  • rate this

    Comment number 240.

    The ongoing problem with the banks is that they are too themselves focussed, and probably too institutional investor focussed.

    How about a regulatory annual customer-satisfaction quetionnaire to all current / deposit and mortgage (and other loan) account holders? THAT would put a bit of customer-focus into the equation, wouldn't it?

  • rate this

    Comment number 239.

    @237 LUCID100
    The legislation was not enacted until December 2012 and its commencement date was April 1st 2013. For no crime to be committed and detected in the period since then is not too improbable.

    However, to expect socially useful behaviour from amoral social predators is stretching optimism too far even for me. Some semblance of humility we may some day discern, and should mistrust!


Comments 5 of 243



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