Appendix 3: Banking Code Standards Board
The Banking Code Standards Board has reviewed the
recommendations contained in the Committee's Report on "Banking
the unbanked" insofar as they relate to the content of the
Banking Code and its monitoring and enforcement procedures.
Let me confirm at the outset that the BCSB wholeheartedly
supports your Committee's objective of reducing the number of
individuals without access to a bank account. Basic Bank Accounts
have an important role to play in financial inclusion and where
they form a part of the product range of a Code subscriber and
they are suitable, they should be available without obstruction
or any dissuasion on the part of frontline staff. We note with
concern the Committee's comment that there is evidence to suggest
that people are still experiencing difficulties in opening a basic
bank account, albeit reflecting branch decisions and attitude
rather than head office policies.
The BCSB has a number of approaches to the monitoring
of compliance with the Code. These range from full reviews of
subscribers to the Code, themed reviews, to surveys, mystery shopping
and intelligence gathered from a range of sources including our
own helpline, FOS, consumer bodies and the media. Where breaches
are identified we require action plans from subscribers to address
the shortcomings and these are monitored by the BCSB for completion.
Disciplinary action is taken over the most serious breaches.
Although we are in no way complacent, we are pleased
to note that there has been a general improvement in performance
by the basic bank account providers over the period that we have
been undertaking mystery shopping and we feel that the fact that
this has been achieved without the need for naming and shaming
individual subscribers is positive. However compliance with the
Code in this area remains a key area of our focus and we have
further mystery shopping planned for early in 2007. I can assure
you that the Code is respected and taken seriously by the senior
management of subscribers.
As the Committee is aware, the Codes are reviewed
every three years and the latest review commenced on 13 November.
Mike Young, who has been appointed as the independent reviewer,
has written to stakeholders seeking views on changes required
to the Codes and we will be ensuring the Committee's recommendations
are brought to his attention. A new edition of the Code is expected
to become effective in March 2008 although certain changes, for
instance the recommendations of the Payments System Taskforce
on cheque clearing times (your recommendation 23), will come into
operation before then.
Although the content of the Code and the accompanying
Guidance are the responsibility of the sponsoring organisations
in tine with the principles of self-regulation, the BCSB has considerable
input to and influence over both of these, and has responsibility
for enforcement. The independent directors of the BCSB will be
making a submission to the review and I comment below on those
of the Committee's recommendations that we will be supporting.
We do believe however that some of the recommendations are of
a commercial or product design nature which would normally fall
outside the scope of the Code and it is more appropriate that
the providers of the products respond to these.
A number of the Committee's recommendations are,
we believe, already covered in the Code. These are:
(Recommendation 9). Banks should have lists of
acceptable ID to ensure staff are able to guide applicants.
As noted by the Committee, there is already a requirement
in the Code to tell customers what information they need to provide
to prove their identity and this will be tested in the proposed
mystery shopping (see below). Banks may also in appropriate circumstances
make reference to the BBA/BSA publication "Proving Your Identity",
(Recommendation 14). Verification of identity
documents to take place at branch level rather than applicants
being required to send documents away to a central point. Additionally
there should be a maximum time of 10 days for the account to become
operational after the customer has provided appropriate identification.
This has been incorporated into the Guidance and
became effective on 30 September.
(Recommendation 16). The Banking Code to be amended
to require all banks to display their basic bank account literature
Guidance which became effective on 31 October 2006
states that "subscribers who provide front of house literature
for their current account range should ensure that such literature
includes reference to the availability of the subscriber's basic
(Recommendation 17). The BCSB to investigate the
extent and form of dissuasion of financially excluded people from
opening basic bank accounts and to take action against those found
to be dissuading consumers.
Dissuasion would be in breach of section 3.1 of the
Code where them is a requirement to offer a basic bank account
if requested and ft meets the need. Monitoring of this will be
incorporated into the planned mystery shopping.
In their submission to the Code review, the independent
directors of the BCSB will also be supporting the following recommendations:
(Recommendation 13). Code to require that where
applicants are declined, an explanation should be given together
with what steps need to be taken to allow the application to be
(Recommendation 15). As basic bank accounts do
not offer any credit, banks should not undertake credit reference
checksas opposed to electronic identity checks.
(Recommendation 15). The Banking Code should be
amended to ensure that basic bank accounts are not unreasonably
denied to those with debt problems, although we note that according
to the FSA guide on basic bank accounts, only 2 of the 17 providers
are shown as indicating that they will reject applications from
those with bad debts.
(Recommendation 24). Banks Should not exercise
their right of set-off from basic bank accounts where a repayment
plan has been agreed and in all cases banks should leave consumers
with sufficient money for day-to-day expenses.
Although already covered by section 14 of the Code
we feel the Guidance could be strengthened to cover the need to
ensure adequate funds for reasonable living expenses.
The recommendation goes on to say that the ability
of the banks to exercise a right of set-off needs to be made clearer
to consumers in the literature issued or when accounts are opened.
This will be recommended for inclusion in the Code.
As mentioned above, we feel that several of the recommendations
fall outside the scope of the Code as they are commercial or product
design issues and these should be responded to separately by the
industry. These are:
(Recommendation 15). All banks should review their
policies where they deny an account to an undischarged bankrupt.
(Recommendation 20). All basic bank accounts should
incorporate a £10 'buffer zone'.
(Recommendation 22). T & Cs of basic bank
accounts to be amended to provide branch counter access.
The Report also recommends that the BCSB conduct
research as a high priority into the experience of consumers operating
basic bank accounts. (Recommendation 26). We understand that the
Financial Inclusion Taskforce has already commissioned BMRB to
undertake such research.
I would now like to turn to Recommendation 7 relating
to the Committee's wish to see the banks identified in the publication
of the full results of the BCSB's next mystery shopping exercise
on the provision of basic bank accounts.
As we explained when we gave evidence to the Committee,
our rules do not permit us to disclose the results of our monitoring
activity unless disciplinary action results and we do not intend
to change these rules. However, in the light of the indications
given to the Committee by the Chief Executives of the largest
providers and your desire to see publication of the results, the
BCSB has written to the Chief Executives of all those firms which
provide basic bank accounts advising them of our intention to
undertake a further mystery shopping exercise in Q1 of 2007. We
have advised them that we will be undertaking an exercise of sufficient
scale to allow them to disclose the results and confirmed that
we are happy for them to do so. The research will be undertaken
on behalf of the BCSB and will be independently conducted. I believe
that voluntary disclosure by the individual banks will enable
the objectives of the Committee to be met.
Finally, we note the Committee's comments on wider
banking issues and you might like to be aware that the BCSB has
recently agreed that Credit Unions who offer current accounts
may become subscribers to the Banking Code. We are currently in
discussions with ABCUL and hope that the first Credit Union will
become a subscriber in the coming months.
I said at the outset that the BCSB supports fully
the moves to achieve financial inclusion and we would very much
welcome an opportunity to meet with you and some of your Committee.
17 January 2007