BBA floats code of conduct to improve banking standards

In its formal submission (28-page / 145KB PDF) to the Parliamentary Commission on Banking Standards (PCBS), the British Bankers Association (BBA) calls for the creation of an independent Banking Standards Review Council (BSRC) to oversee the new code. Alternatively, new conduct and compliance regulator the Financial Conduct Authority (FCA) could take responsibility for ensuring that banks and their employees comply with the code.

Other measures proposed by the BBA include expanding the existing regime to cover all industry employees involved in customer-facing activity and the toughening up of standards. It also takes a 'bottom up' approach to standards, by increasing the independent oversight of professionalism and training by a new Professional Standards Board.

The report follows an appearance by new BBA chief executive Anthony Browne before the PCBS to discuss possible measures to improve standards in the banking industry. Chaired by Andrew Tyrie, who also heads the Treasury Select Committee, the PCBS was set up in July 2012 to consider and report on professional standards and culture in the UK banking sector. It is currently hearing evidence from the industry with a view to making legislative recommendations.

The idea of the creation of an independent BSRC has been developed by a special BBA taskforce, working on behalf of professional services firm KPMG, and has been discussed with the chairs of the six main UK banks. According to the paper, the BSRC would need to be independent of the BBA and the rest of the banking industry, with an independent chair and a majority of independent non-executive directors.

The new code of conduct would set out ethical principles which bank employees at every level would be expected to comply with. According to the BBA, it would need to apply to company boards, senior management, controls, systems and remuneration structures. Alternatively, the BSRC could instead operate a 'blacklist' of employees with the intention of preventing those individuals from working either in banks or within the wider financial services sector. The BSRC should also monitor banks' 'whistleblowing' regimes in order to ensure that they are effective.

As part of its work to strengthen the existing regime the PCBS should work more closely with the FCA on its own intentions for toughening up standards, for example through the use of the Approved Persons Regime, the BBA said. It proposes that all bank employees with "significant responsibility for risk or customer-facing activity" should be covered by the regime, while the regime overall should be underpinned by an overarching requirement for bank employees to observe its principles.

In a covering letter sent with the proposals to the PCBS, Browne said that any final decision on standards should "align to the regulatory architecture about to be put in place with the advent of the Prudential Regulation Authority and the Financial Conduct Authority", and take account the needs of businesses.

"In considering the optimal solution, it is vital that the UK remains an attractive place to do business," he said. "A well-formulated, proportionate approach should enhance the attractiveness of the UK as a place to do business, rather than reduce it."