Supplementary memorandum submitted by
the Banking Code Standards Board
FOLLOW UP TO EVIDENCE SESSION ON 14 MARCH
2006[42]
The Banking Code Standards Board shares the
Government's and the Treasury Committee's wish to reduce the number
of adults in households without access to a bank account and we
believe that our work on basic bank accounts over the past four
years has materially helped towards that goal. Your Committee
is aware of the significant improvement in the performance of
suppliers of basic bank accounts in each of our surveys.
In reply to your specific requests for further
information:
DISCLOSURE OF
SUBSCRIBERS' NAMES
IN OUR
MYSTERY SHOPPING
SURVEYS (Q 344) [43]
As explained on 14 March, the Banking Code is
a voluntary code of practice to which almost all retail financial
institutions subscribe. The BCSB is a body independent of the
industry with a role to monitor and enforce compliance with the
Code. The relationship between the BCSB and individual subscribers
is contractual in nature, being governed by the Banking Code Rules,
which incorporate a Compliance Policy and a Disciplinary Procedure.
A copy of these documents is attached. (Not printed)
Our normal practice when we give a red or amber
grading in a monitoring report is to obtain the subscriber's agreement
that there are significant shortcomings, to agree an action plan
and then to conduct a follow up review to ensure that the deficiencies
have been corrected. Only if the breach of the Code is "material"
or if the shortcomings are not corrected rapidly, would we take
disciplinary action. This approach works well. As we mentioned
at the hearing, the senior management of our subscribers take
our recommendations very seriously.
If it comes to disciplinary action against a
subscriber, our disciplinary process incorporates the general
principles of natural justice, requiring the BCSB to provide details
of the alleged breaches and entitling the subscriber to respond
to the allegations before a separate disciplinary committee, comprising
two independent directors and one industry director, and chaired
by an independent, legally qualified chairman. Sanctions may be
imposed by the disciplinary committee where it is satisfied on
the balance of probabilities that the evidence presented indicates
that serious breaches have occurred.
The sanctions available are:
— The issue of a warning or reprimand.
— The issue of recommendations on the
remedy of past conduct.
— The issue of directions as to future
conduct.
— The publication of the subscriber's
name and details of the breach in the BCSB Annual Report.
— Public censure of the subscriber
by notifying the media of the disciplinary findings and any other
sanctions applied, and publication in the BCSB website.
— Cancellation or suspension of the
subscriber's registration.
These procedures are broadly similar to those
of the FSA. Our legal advisers reviewed our disciplinary procedures
prior to the coming into force of the Human Rights Act and suggested
changes that needed to be made to comply with this new piece of
legislation. We understand that this was standard practice across
the financial services sector.
Section 5.3 in the Banking Code Rules states:
"The BCSB shall not, save as required by law,… divulge
any information in relation to the affairs or business or method
of carrying on business of the subscriber which it knows at the
time to be confidential and which it has learnt as a result of
its dealings with that subscriber; save that the BCSB may identify
to any governmental organisation or body whose principal purpose
is regulation (including self-regulation) a subscriber about which
it has serious concerns. With the consent of that subscriber,
the BCSB may divulge to any of these bodies information in the
BCSB's possession regarding that subscriber."
The contract between the BCSB and each subscriber
does not permit the BCSB to publish details of alleged breaches
of the Code committed by that subscriber unless the subscriber
has had the opportunity to answer those allegations. We believe
that the results of the survey which have led to a "red"
or "amber" grading in one of our reviews is tantamount
to a disclosure of a breach of the Code and would certainly be
regarded as such by the public and the authorities.
I confirm that if an individual subscriber gives
the BCSB consent to disclose specific information held by the
BCSB about that subscriber to the Treasury Committee, we would
be able to release such information. If the Treasury Committee
wishes us to do so, we will ask all the subscribers in the survey
if we may release the information to the Committee.
CHANGES TO
THE CODE
RELATING TO
BASIC BANK
ACCOUNTS (Q 346)[44]
It may be helpful to explain the process by
which the Banking Code is reviewed. Following the report of DeAnne
Julius for HM Treasury, arrangements were made to appoint an independent
reviewer to lead the arrangements for making changes to the Code.
That person is responsible for consulting all stakeholders, holding
round table meetings and recommending changes. Those recommendations
are published along with the industry's response. This process
has worked extremely well.
In 2002 and 2004, Professor Elaine Kempson of
Bristol University was the Independent Reviewer. In her 2004 report,
she recommended that reviews should be conducted thereafter on
a triennial rather than a biennial basis. However, a procedure
for holding interim reviews was needed in the event that changes
in a particular area were required between full reviews. An Independent
Interim Reviewer has now been appointed, ready to serve should
the need arise. Also, sponsors of the Code do have the ability
to make ad hoc changes to the Code and/or Guidance without
recourse to a formal review, should their members agree that changes
are justified to address the existence of, or potential for, consumer
detriment. You may be aware of recent changes to the Guidance
on credit assessment standards.
However, it is important that a balance is struck
between the ability of the Code to be updated quickly, outside
the formal review process, and the need for subscribers and consumers
to have a stable Code with which to interact.
My independent Directors recognise that the
changes affecting basic bank accounts are ones which should now
be expedited and we have asked the industry for their views. I
hope to receive their answer shortly. I will let you know when
I do. In the event that the industry's response does not concur
with our position, the opportunity exists for the BCSB to call
for a formal interim review. This will be discussed at our next
Board meeting. I anticipate that it will not be acceptable to
the independent Directors to wait until the expected date of the
next Code, March 2008, before making any changes. Flexibility
and responsiveness are indeed advantages of self-regulation.
QUALITATIVE RESEARCH
ON BASIC
BANK ACCOUNTS
(Q 388)
We shall be putting research proposals to a
future Board meeting. Having focused heavily on account opening,
we accept the view that more information is needed now on how
the accounts operate after they have been opened.
Finally, I should say that we appreciate the
support that the Treasury Select Committee has given to the BCSB's
work in the past and we share many of your objectives on financial
inclusion. We shall do what we can to assist you in meeting our
shared objectives.
April 2006
42 Ev 63-72 Back
43
Ev 64 Back
44
Ev 70 Back
| 
