Select Committee on Treasury Appendices to the Minutes of Evidence


Memorandum from the Banking Insurance and Finance Union (BIFU)


  BIFU is a TUC-affiliated trade union representing workers employed across the finance sector. This submission responds to the Treasury Select Committee's request for views concerning the activities to be covered by the proposed Regulatory Reform Bill and how the FSA can deliver effective regulation. A summary of the main points is presented below:

    —  Employers in the finance sector can add an important dimension to the quality and scope of regulatory decisions. Practitioner involvement is important and the definition of a practitioner should be broadened to include those working in the "front line".

    —  Recognition needs to be given to the inter-relationship between regulation and employment practices and how it impacts on the consumer.

    —  The FSA should have a duty to consider the issue of access to financial services as a statutory objective.

    —  "Consumers" should be defined in the broadest sense to include those unable to gain access to affordable or appropriate financial products or services.

    —  The FSA Bill should underpin the Banking Code of Practice by making it a licence requirement to adhere to it.

    —  The FSA Bill should consider any powers and objectives the regulator would need in relation to information and disclosure legislation.


  1. The Banking Insurance and Finance Union (BIFU) is a TUC-affiliated trade union representing some 113,000 members employed across the finance sector. The Union represents staff in all grades and all occupations, not only in the major English and Scottish banks, but also in international banks, the Bank of England, insurance companies, building societies, finance houses and the FSA itself.

  2. The Union supports the FSA's aims of consumer protection, the promotion of clean and orderly markets and the maintenance of confidence in the financial system. We are committed to good practice throughout the sector.

  3. The terms of reference of the Treasury Committee's inquiry are detailed in the Committee's Press Notice No. 14. This submission addresses the issues of activities to be covered by the new Bill to ensure a satisfactory level of consumer protection, and how the FSA can deliver efficient, cost-effective and practicable regulation.

  4. BIFU wishes to ensure the professional integrity of our members and recognises the importance of having a finance sector that is well regarded by the public. We are pleased to have this opportunity to contribute to the Committee's inquiry.


  5. BIFU contends that those who work in the industry can add an important dimension to the quality and scope of regulatory decisions. The active involvement of those who work at the sharp end of the industry can provide insights which are of real value to the aim of consumer protection. For instance, the pressures of commission-based payments systems is something representatives of finance sector workers have highlighted for some time. It appears that only after the misery and adverse publicity caused by the pensions mis-selling episode that the consequences of such pressures for consumers are being recognised.

  6. We are also only too aware of the way in which regulatory issues impact on the livelihoods and careers of those who work in the industry. This only strengthens the case for the involvement of "front line" practitioners in the regulation process.

  7. In our response to the FSA's consultation paper on practitioner involvement, we make the point that the definition of what constitutes a practitioner needs to be broadened. Regulators have tended to restrict it to directors and senior executives of financial institutions. BIFU believes this should be extended to include "front line" practitioners who have particular knowledge and experience of the industry and the effects of regulation.

  8. We endorse the reasons for practitioner involvement outlined in the FSA's consultation paper No. 2, namely:

    —  formulate sensible policies and improve decision-making;

    —  react promptly and appropriately to new products/practices;

    —  practise efficient, cost-effective, proportionate and practicable regulation;

    —  avoid unnecessarily inhibiting innovation or impeding firms in serving their customers;

    —  engender industry confidence in the fairness and quality of FSA's exercise of powers;

    —  secure the understanding and commitment of the regulated community.

  9. We believe that these objectives will be best met with the active involvement of those who work at the sharp end of the industry.


  10. Regulators have tended to dismiss the relationship between their operations and employment practices. BIFU strongly contends that this is simply not an acceptable or responsible way for a regulator to behave. Among the regulatory issues that impact on the work environment of the industry's employees and have implications for consumer protection are remuneration systems, references and discipline (see paragraphs 13-15 for further detail).

  11. The FSA should establish a standing panel on employment practices to investigate the inter-relationship between regulation and employment practices and how it impacts on staff and customer service. We also believe that the issues of training and competence and financial literacy are worthy of investigation.

  12. On the issue of individual registration and discipline, BIFU has a number of concerns which require practitioner involvement in order for them to be resolved effectively.

  13. The first concerns the legal relationship between the employer and the employee. At the moment it is not clear which area of law, employment or regulatory, takes precedence. There are many areas of overlapping procedures. For example, complaints registered against an employee for compliance purposes may affect their appraisal, performance related pay and/or selection for redundancy.

  14. In addition, there are areas in which complaints may arise which are beyond the control of the individual employee. For example, where a product has not performed as well as the customer had hoped for or where pressures are put on individuals internally in the company to sell certain products, for example by the nature of the remuneration system.

  15. Thirdly, the FSA must ensure its procedures/requirements are clearly understood and consistently observed. BIFU has had experience of individual employers' uncertainty about their obligations under current regulatory requirements, particularly when it comes to the area of employee references. We have had cases where individual employees have not known about complaints lodged by their name and these have only come to light when a reference has been sought by a potential new employer. In at least one case, even though all complaints against an individual had been rejected the potential employer stated they would not endorse their offer of employment because of the number of complaints that had been received. Employees who have committed no offence could find themselves unable to work in the finance sector ever again.

  16. BIFU is committed to wrongdoers receiving the appropriate punishment. However, workers in the industry should not be subject to unfair, and potentially career threatening, sanctions in the name of "regulation".

  17. The FSA needs to ensure that the terms of individual registration allow for fair and open disciplinary and appeals procedures. It also needs to examine how these relate to employers' own disciplinary procedures and obligations regarding references.

  18. We believe that the points outlined above re-enforce our arguments concerning the inter-relationship between regulation and employment practices and the need to establish a separate Employment Practices standing panel.


  19. Access to basic financial services is increasingly an essential part of social well-being in a modern economy. Yet, according to the Policy Studies Institute, one in five householders do not have a current bank account, a quarter have no house contents insurance and little over a quarter have no credit facilities (The Guardian, 11 February 1997).

  20. Possession of a bank account is increasingly important for the receipt of salaries, pensions and benefits, as well as for the payment of bills. BIFU believes that access to financial services is essential to full participation in the community and promotes the concept of "financial citizenship".

  21. Utilities regulators have a duty to consider the interests of the disadvantaged. We believe that the FSA should have a similar duty in relation to access to financial services and that this should be a statutory objective of the FSA. The objective might be: "to have regard to the need for access to appropriate financial services for all sectors of the community."

  22. BIFU thinks it is important that the FSA defines "consumers" in the broadest sense. Rather than focusing solely on those already in the financial system, "consumers" should also include those unable to gain access to affordable or appropriate financial products and services.

  23. BIFU has a particular interest in the issue of bank and building society branch closures. We think that banks should be required to consult all stakeholders (including unions, customers and local communities) before closing branches and to consider how to address the needs revealed by the consultation. We believe that this could be included in the banking code of practice and that the FSA Bill should underpin the code by making it a licence requirement to adhere to it.

  24. BIFU is also interested in the potential for information and disclosure legislation, drawing on the experience of the Community Reinvestment Act in the USA, requiring banks to report on the distribution of their lending. Whilst we assume that this would require a separate piece of legislation, we are keen to ensure that any powers and objectives that the regulator needs to carry out its role in this area are identified when drafting the FSA Bill. These would include the powers to require information, to require release of information and to carry out research.

21 April 1998

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