DESPITE new regulations and years of effort to change corporate culture, banks in Britain still believe that they are “privileged” and show little self-restraint, the Archbishop of Canterbury has said.
Speaking during a debate in the House of Lords on how to change standards in the banking industry, Archbishop Welby said that the key was to shift the internal culture in the City. He said that new rules from both the Government and Bank of England after the financial crisis had been “extensive, and in many cases very effective”, but much more needed to be done.
“We need a definitive change of culture to one that says that banks should be treated in ways that encourage competition and reduce government guarantees,” he said. “Banks should not be content with being privileged, but should have a service mentality growing ever stronger, and should show self-restraint.”
In particular, there were not enough new banks entering the market to challenge the existing firms, and not many people were switching their accounts from bank to bank. “Thus, one can talk fairly and with reason about a banking market that simply does not function as a market,” he said.
The Archbishop, who worked in the oil industry before he was ordained, sat on the Parliamentary Commission on Banking Standards, which, in 2013, produced the report Changing Banking for Good (News, 21 June 2013).
This report recommended a string of reforms, including new criminal offences for reckless misconduct by senior staff at banks, and powers for the regulator to cancel any bonuses and other payments due to management at a bank that required a taxpayer bailout.
The Bishop of St Albans, Dr Alan Smith, introduced the debate in the House of Lords on Thursday last week, to mark three years since the report was published, and to ask the Government what progress had been made.
Dr Smith recalled the “blunt” conclusions of Changing Banking for Good: “Banks in the UK have failed in many respects. They have failed taxpayers . . . they have failed many retail customers . . . they have failed their own shareholders . . . [and] they have failed in their basic function to finance economic growth.
“The banking crisis of 2008 was, after all, not primarily a regulatory failure but a moral failure. It was a failure of a corporate culture that came to reward irresponsible and reckless behaviour, eschewed accountability among senior managers, and failed to value the interests of its customers, and which refused to acknowledge its duties and responsibilities to wider society.”
What was needed was a renewal of banking’s historic values of responsibility, to re-attach the industry to its “moral moorings”, Dr Smith said.
The creation of a new Banking Standards Board, which was recommended by the Commission, was a good step towards this, he said.
The previous day, new rules — also inspired by the Commission’s report — which create more protection for whistle-blowers, and compel banks to set up confidential hotlines to enable staff to report malpractice without fear of reprisals, came into force.
Replying for the Government, Lord Ashton of Hyde said that real progress was being made, particularly in changing rules so that senior executives who recklessly allowed their banks to fail could now be jailed for up to seven years.
Since 2010, 11 new high-street banks had been authorised to begin trading, he said. “We know that momentum, once generated, must not be lost. That is why it is crucial that this vital industry learns from the mistakes of the past and moves on from them to earn the trust of the public once again.”