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!

  • rate this

    Comment number 238.

    Is the banks' support for the creation of Sir Richard Lambert's Banking Standards Oversight Board suggestive of the banks having no confidence in the FCA's Conduct Risk agenda? If so, where do we go from here? A return to self-regulation perhaps? Does anyone know what the FCA thinks of Sir Richard's proposal?

  • rate this

    Comment number 237.

    235 Grounder
    Are you saying we should just wait and see what happens next.
    If legslation was introduced in 2012 we should have had sufficient time already shouldn't we.
    I'm not baying for their blood I just want to see some socially useful behaviour from them and maybe a little humility.
    They could perhaps offer to give us back some of our money they helped themselves to and still are.

  • rate this

    Comment number 236.

    Let's face it, the bankers led the way in business immorality, which has spread to large companies generally. The politicians who are their accomplices, generally concur, because they are powerless. Even the weak Basle Rules were watered down again this year at the behest of the bankers. Now, if we could get everyone to draw their money out of the banks at once, they might behave better??????

  • rate this

    Comment number 235.

    @234 LUCID100

    All I am trying to say is that there is, in fact, new legislation in place but that I am not in any position to judge how effective it has been so far or will be in the future.

    Perhaps the Lambert Plan is partly a response to the legislative pressure, and perhaps it will prove more effective than a few words of law. It is too early to judge, in my opinion.

  • rate this

    Comment number 234.

    229 Grounder
    So as I may know no bankers in your opinion I should not criticise their behaviour and the obvious damage they have done to our and the worlds economies.
    What are you trying to say? That they have caused no damage?
    And by the way if thorough investigations/audits were performed rather than what we have had we may have been able to at least deter bad practice.

  • rate this

    Comment number 233.

    Yoda @230
    "a socialist is just a capitalist"

    And a capitalist just a socialist, of course

    Most mundane truths of 'categorisation', the all-inclusive

    But if it is relevant to remind (I fear you might be right), why not say it nicely?

    Like those nice Mssrs Cameron & Osborne: we are "all in it together", in society (socialist), needing to invest (capitalist) and invest 'well' (democratic)

  • rate this

    Comment number 232.

    Grounder @228
    As ever, for (future) real democracy!

    Individual influence in government ('of, for, by the people' or not) will always be 'unequal': in transition from cradle to grave, with generational experience, with specialist knowledge & many other personal qualities

    'Wealth' will always be unequal: we spend & value differently

    Why pre-evaluate? Investment is in partnership.

  • Comment number 231.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 230.

    And lets not forget that any problems that crept into banking did so under a socialist government. A socialist is just a capitalist without the money, they only want wealth sharing out because they haven't got any, socialism is the politics of greed and envy. Leave it in the 20th century and at the BBC , it's last resting place.

  • rate this

    Comment number 229.

    @226. LUCID100
    "Yes you may be correct re legislation but the law has to be seen to be applied and justice served.
    Which it isn't and the bankers do not seem to be too concerned about this law and as yet no charges have been made.
    It this really because no wrongdoing has been done?"

    I don't know any bankers who are not concerned, nor do I know any who have done wrong - I know no bankers!

  • rate this

    Comment number 228.

    @222 All for All

    Ah, hypothetically...?

    Banks could be a mechanism for levying a wealth tax, but why tax (meagre) cash holdings while leaving real assets untaxed?

    Why should anyone attempt to pre-judge the worth of an investment proposal when the borrower has the capacity to "suffer" the consequences of its failure?

    Why the same fuel allowance, disregarding insulation or sensitivity to cold?

  • rate this

    Comment number 227.

    I've never met a banker yet who wasn't happy in his work. Don't envy them because they have worked hard at school and forged a career for themselves which not only benefits society but brings them personal satisfaction. The socialist politics of envy will not make your life or job any more enjoyable for you. If you hate your life change yourself don't blame those who understand maths for your woes

  • rate this

    Comment number 226.

    220 Grounder
    Yes you may be correct re legislation but the law has to be seen to be applied and justice served.
    Which it isn't and the bankers do not seem to be too concerned about this law and as yet no charges have been made.
    It this really because no wrongdoing has been done?

  • Comment number 225.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 224.

    HA! HA! HA!. Yoda
    @ 223
    "The clothes you wear, the shoes on your feet, your home the welfare state.... everything you have and hold dear was given to you by a banker "

    No banker ever gave anything he hadn't defrauded a real worker. a producer of items of value, of somewhere along the line ....

    A banker can not make money with out making someone else poorer


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