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.

Start Quote

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

End Quote

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

Which budget will matter?

As and when decisions on income taxes, welfare and public spending are devolved to the nations, will the budgets for England, Scotland, Wales and Northern Ireland become more important than the UK's famous budget?

Read full article

More on This Story

More from Robert

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +1

    Comment number 23.

    I have been saying since 2008 that the Theft Act is perfectly adequate.

    All you need is someone prepared to enforce it.

  • rate this
    +2

    Comment number 22.

    http://www.bbc.co.uk/news/business-25558241

    'Barclays boss Antony Jenkins says it'll take five to 10 years to restore trust in banks, while Archbishop Welby says it'll take a generation'

    Sorry, I see banks as delusional, 5yrs for the public to trust them when they cant even trust themselves? I think Archbishop Welby is optimistic. Banks are just one long series of train crashes, no end in sight

  • rate this
    +2

    Comment number 21.

    It would be nice to believe they get it. Yet, this is a voluntary organisation with less teeth than a regulator. Didn't work so well in... say... the press.

    Bankers only know that they're not liked. They need less carrot and more stick. Then they'll maybe get it.

  • rate this
    -8

    Comment number 20.

    I see once again preston is doing a great tory and bakers pr role.
    pretending this is all about bankers getting their acvt together when in fact it will be a bank paid for pank rulled lobby group to ensure bankers can carry on as they always have

  • rate this
    +22

    Comment number 19.

    An a former banker I can say that as long as you have targets staff will do whatever is necessary to avoid the consequences of not hitting them and managers will turn a blind eye to what is done as long as they look good to their boss. Bankers are paid well enough as it is, they don't need bonuses. Co-operative, positive customer focus management is what is needed , not 'performance management'.

  • rate this
    0

    Comment number 18.

    people shouldn't comment on something they don't understand

  • rate this
    +5

    Comment number 17.

    The credit crunch started with banks not trusting one another and now we are told the banks dont trust themselves. My word we have made progress havent we

  • rate this
    +8

    Comment number 16.

    "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?"

    Of course it is. Many people are so completely sickened by the whole banking culture.

    They see no difference at all between the high street banks, and therefore see no point in going to all the trouble to switch.

  • rate this
    0

    Comment number 15.

    J A I L

    - there's an idea

  • rate this
    +7

    Comment number 14.

    10. Steve
    JUST NOW

    20 years ago there were financial advisors, no one wanted to pay for their advice.

    They are now retail products and you will therefore get no more than you would on the side of a can of beans.

    Educated people don't have the slightest idea of their rights or responsibilities.

    In the same breathe they will pay 2% to estate agent to show them round a property. Go figure!

  • rate this
    -1

    Comment number 13.

    Jail all the bankers who caused the financial mess, make sure all new bankers do not receive any bonus until they have been working successfully and legally for at least 10 years and get all the bloody bankers and hangers on away from the Treasury and George Osborne after all Carney is his little lap dog there to sit up and beg when Ozzie tells him

  • rate this
    +12

    Comment number 12.

    "Is it that the rewards in their investment banking operations are so enormous, & 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 & rig markets?"
    ~
    Just to remind you Robert, PPI & sub-prime were largely a feature of branch, group & area selling, not single location trading.

  • rate this
    0

    Comment number 11.

    If only Maggie hadn't sold off Westminster to the private sector there might have been some hope.
    The most valuable silver was melted down some time ago, reduced to wandering in the wilderness speaking gibberish ever since happy that our houses were worth more.
    Thatcher's children are in charge and are unable to "see" any straight way.

  • rate this
    0

    Comment number 10.

    the current system at the bank I worked for for 30 years is to describe every product, give no advice, hand over brochures and let the customer pick. This is to appease the regulators, but does not stop the customer making the wrong choice and then crying fowl play many years down the line.
    Better would be if customers were treated like adults by the govt and made responsible for their actions.

  • rate this
    -1

    Comment number 9.

    When you look at the numbers involved, I can understand why no government has acted is seems willing to act. It's a pointless conversation unless the changes are global.

  • rate this
    0

    Comment number 8.

    Banks? I can't be bothered with them. All they want to do is screw everyone over.

    They provide no social worth whatsoever and just suck lifeblood out of the economy.

    Nationalise the lot of them. Loans will given to those who can prove that they pay them back or have a sound business plan.

    They'll be more responsive to the economic needs of society rather than tax avoiding shareholders.

  • rate this
    -8

    Comment number 7.

    5. alan
    7 MINUTES AGO

    Why do so many people in this country think that private businesses like the banks are so much better run than public organisations like the armed forces and the NHS?

    I am guessing the banks have never deliberately killed someone because they have to much admin to do their jobs. So in materiality, banks are a long way shy of being that fraudulently dishonest and callous.

  • rate this
    +2

    Comment number 6.

    Banking used to be intensively policed, inside Bank Co. & even down to Branch level. Staff were carefully controlled, had to bank with that branch & have a/c open to inspection, (personal) gambling was frowned upon & unmarried female clerks who married a colleague were expected to leave. In-house Inspectors could turn up at any time.

    Then there were the BoEngland Inspectors ....

  • rate this
    0

    Comment number 5.

    So much for free-marketeers, libertarians, the invisible hand and laissez-faire.
    Why do so many people in this country think that private businesses like the banks are so much better run than public organisations like the armed forces and the NHS?
    Alan

  • rate this
    +16

    Comment number 4.

    3. Friendlycard
    JUST NOW

    Agree with that all the way.

    The guilty walk away and leave someone else with the bill for their mess and then again for sorting it out.

    But that seems fine in this country, as long as we can attack someone and make them pay, who cares if they are innocent

 

Page 12 of 13

 

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.