Lambert: This is banks’ last chance to behave well
BANKS must treat customers well or face more regulation, Sir Richard Lambert said yesterday as he unveiled his plans for a new body to raise standards in the industry.
He wants banks to publish a wide range of information every year, including customer satisfaction, staff training plans and pay structures.
Sir Richard hopes this will establish benchmarks for banks to compare behaviour against each other.
This increased transparency should then put competitive pressure on those who are letting customers down.
But the body will steer clear of regulators’ jobs, not taking complaints from customers or forcing bad bankers out of the industry. It will also avoid setting any pay caps, instead focusing on ensuring the structure of bonus schemes is designed to help customers.
The former boss of the CBI hopes the standards body will be up and running this year, establishing benchmarks and having an impact in the coming years.
The alternative, Sir Richard fears, is ineffectual regulation, hurting competition by creating more hurdles for new banks, and driving up costs in the sector, ultimately hurting consumers.
“There is quite a wish for this to work, from the Bank of England, the Treasury, regulators – they want it to work because they recognise that if it doesn’t the alternative is more statutory intervention,” Sir Richard told City A.M. “You could arrive at the point where you throttle the system, where people are only interested in the letter of the law, not its spirit.”
“I don’t think you can legislate good behaviour.”
Banks including HSBC, Barclays, Lloyds and RBS, as well as building society Nationwide asked Sir Richard to put the plan together.
The initial reception has been warm, raising hopes all major lenders will join up, lending the new standards body credibility. The standards body will include a board of up to 12 members, with a majority from outside of banking to ensure its independence.
In the longer term it could become a membership group, like those in the accounting sector, operating as a stamp of approval on individual bankers.
SIR RICHARD’S PLAN
Sir Richard Lambert wants banks to publish information on how they treat customers, every year.
The aim is to make banks behave better, at all levels, and to put an end to the scandals of recent years.
Information published will include conduct measures, like staff surveys, recruitment techniques, whistleblowing hotlines and the structure of bonuses.
It will also look at the way staff are trained and the qualifications they hold.
And it will include customer outcomes, with satisfaction surveys, complaint volumes, the way those complaints are handled and how the banks interact with regulators.
Sir Richard hopes the regular pressure on banks will not just raise the standards of the worst lenders but force the whole sector to keep on improving year after year.
Banks will have a choice over whether or not to join the scheme.
The biggest lenders commissioned Sir Richard to plan the standards body and they appear happy with the proposals.
The body will be funded by banks, paying in proportion to their size.
In time it could chance to a membership organisation, where individual bankers sign up. In industries like accounting the setup is voluntary, but in practice those who have not joined the standards boards are not employable, thus giving the bodies authority.
The board will be made up of a small number of bankers and a majority of senior people from other fields, in a bid to make the set up independent.
The initial report is a consultation document, and is open for replies until 7 March.