By Sharlene Goff, FT Retail Banking Correspondent

A new organisation charged with raising standards in the banking industry will rely on public naming and shaming of lenders that fall short as it attempts to clean up the sector after a series of misconduct scandals.

The UK’s seven largest lenders have agreed to report each year to the new Banking Standards Review Council.  The body will set standards for “culture, competence and customer outcomes” and publish an annual report detailing where banks have failed.

MPs, consumer groups and industry experts said it was critical that the organisation – which was recommended by Sir Richard Lambert, a former chairman of the CBI business group and previous Financial Times editor – worked alongside financial regulators and was not seen as a substitute.

“Sir Richard’s proposals [will not] seek to duplicate the crucial work that needs to be done directly by banks and by regulators,” said Andrew Tyrie, chairman of the Treasury Committee who led the banking standards commission last year. “There can be no substitute for standards reform from within banks and for higher-quality regulation to support it.”
Sir Richard said the BSRC was “absolutely not a regulatory body – it needs to stay out of the way of the FCA”. Instead he said it was “ a collective effort to raise standards” by identifying good practices and challenging banks to pursue them.

The chair of the council will be selected over the coming months by a panel led by Mark Carney, the governor of the Bank of England.  The standards will only apply to banks’ UK operations – Sir Richard concluded it would be too difficult to apply them worldwide given the different regulatory landscapes.  He hoped to make the council more “credible” by attracting other institutions, from the biggest foreign investment banks operating in the UK to small retail challenger banks.

Given it will be funded by the banks – at an estimated cost of £7m-£10m per year – he admitted people were “naturally sceptical”.   Critics also stressed that the body does not have disciplinary powers and relies on banks following the code on a voluntary basis.

Bill Michael at KPMG, a consultancy, said its success “hinges on getting the right people in place and ensuring the body is properly funded to achieve its goals”.

  • sir richard lambert