Senior Pensions Consultant
Out-Law News | 20 May 2014 | 10:14 am | 2 min. read
Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander and Standard Chartered will work with a new independent Banking Standards Review Council (BSRC), the creation of which was recommended by a review commissioned by the institutions and chaired by Sir Richard Lambert, former head of business body the Confederation of British Industry (CBI). The new BSRC will work with the firms to define standards of good practice and help assess how well firms are meeting them, according to an announcement by the BSRC.
The chair of the new body will be appointed by a panel of "respected figures from outside the banking industry", chaired by Bank of England governor Mark Carney, according to the announcement. Carney said that the BSRC would work with the regulators to ensure the integrity of the UK financial system.
"I encourage all banks that operate in the UK, both domestic and foreign, to support this endeavour," he said.
"We need a financial system that is safe, fair and acts with integrity. The Bank of England is doing its part to ensure safety and soundness. Integrity, however, cannot be regulated. It must come from within. Only exemplary behaviour can confer the social licence necessary for our banks to be active participants in ensuring that the UK financial system remains a global good and a national asset," he said.
Banking reform expert Tony Anderson of Pinsent Masons, the law firm behind Out-Law.com, said that "effective interaction" would be needed between the new body and conduct and compliance regulator the Financial Conduct Authority (FCA), in order to "enable its recommendations to be acted upon". Additionally, "adherence to such standards" should not "stifle innovation or appropriate risk-taking within banking", he said.
The BRSC is expected to be up and running "by the turn of the year", Lambert said. It would then be expected to publish a full report on the current state of banking standards and industry good practice in the first half of 2015, according to his final report.
Lambert's review was commissioned by the lenders in response to the recommendations of the government's Parliamentary Commission on Banking Standards (PCBS), which was set up to review professional standards and banking culture following allegations of misconduct in relation to LIBOR. The UK government is taking forward several of the recommendations made of it by the PCBS, including the creation of a new criminal offence of reckless misconduct by senior bankers and a new two-tier authorisation process for bank staff, as part of last year's Banking Reform Act.
The BRSB will require participating lenders to commit to a programme of continuous improvement under three headings: culture, competence and consumer outcomes. It will be involved in drawing up voluntary standards of good practice in areas serving the public interest; including whistleblowing protocols, the approach to retail sales incentives, banks' processes for handing small businesses in distress or the management of high-frequency trading, according to Lambert's report. It will publish its own annual report on where progress is being made, both by the sector as a whole and by individual banks and building societies, but will not have the power to enforce the new standards.
Participating institutions have committed to funding the new body for at least the first three years of its operation, according to Lambert's report.
Senior Pensions Consultant