Banking StandardsLetter from Anthony Browne, Chief Executive, and Sir Nigel Wicks, Chairman, British Bankers’ Association

We are writing to you as chairman and chief executive of the British Bankers Association, with the support of the chairmen of the six main UK banks.

The most important priority for the banking sector is to earn back the trust and confidence of the British public and the business community, particularly smaller businesses, and to reinforce the reputation of the UK as the leading international global financial centre.

All UK banks have been making reforms to earn back trust, but there is still clearly much more to do. One of the most fundamental challenges is ensuring that banks can demonstrate the professional and ethical standards that the public—and bank employees—have the right to expect. Lapses in, and breaches of, existing standards have been evident in many of the recent scandals, reinforcing the need to add rigour to the definition and enforcement of required conduct.

The BBA submission to the Parliamentary Commission on Banking Standards (sent separately) sets out a wide range of opportunities for raising standards, illustrating that this is not a simple problem with a simple solution, but rather that there are a range of actions that could be contemplated. There is already a strong regulatory and legal regime, which through ongoing reform and restructuring is necessarily being more rigorously—and visibly—enforced. As banks, we also recognise the need to reinforce our own efforts to raise professional standards, including building on the work of the various professional institutes.

We strongly believe that any incremental reforms must be considered against the existing backdrop of the upgrading of the regulatory regime in the UK, with the separation of the FSA into the FCA and PRA, which are being given new powers. In particular, we understand the FCA will be expanding the Approved Persons Regime, to make it more effective.

However, should the PCBS conclude these reforms are not sufficient and that a broader initiative than that governed by the FCA’s general principles of conduct and its Approved Persons Regime is required, we recommend that consideration is given to the establishment of an independent body with responsibility for establishing general conduct principles, monitoring how these are being applied in practice and how practitioner firms are enforcing their own codes of conduct; this might take the form of a “Banking Standards Review Council” (hereafter referred to as BSRC for convenience). The BSRC could set the framework for an industry-wide code of conduct, monitor how it is being applied, receive and address reports of alleged breaches and thereby ensure that banks and their employees live up to the standards set out in the code.

Clearly the BSRC would have to be independent of the industry, and should have a governance structure that reflects all stakeholders, including those who represent the users of financial services as well as the wider public interest. There would also be the possibility of combining some of what is currently done through the FSA’s Practitioner and Consumer Panels, thereby contributing to both simplifying and enhancing the governance framework.

There are many issues that would need to be resolved, most critically the relationship of any new body with the existing regulatory regime. But if the PCBS decides that a BSRC should be established, then the major British banks are ready to pledge co-operation.

We hope you find this commitment, and the BBA evidence, a useful contribution to your vitally important work at the Parliamentary Commission on Banking Standards.

We too are committed to raising standards in the industry, and keenly await your findings and recommendations.

9 January 2013

Prepared 19th June 2013