Banking StandardsWritten evidence from ifs School of Finance
Further to the oral evidence provided by ifs School of Finance Principal Gavin Shreeve on 14 January 2013 we are taking up the Commission Chair’s invitation to submit further written evidence below.
Given the nature of some of the questions from both Pat McFadden and Lord Turnbull, it might be helpful to clarify that the ifs School of Finance was previously known as the Chartered Institute of Bankers. Although we changed our name in 2006 we have retained the rights to the Chartered Institute of Bankers name and more importantly we remain an organisation incorporated by Royal Charter.
The Chartered Banker Institute is the “trading” title for the Chartered Institute of Bankers Scotland (CIOBS) which also retain the rights to, and occasionally uses, the CIOBS name.
Membership
Like the GlOBS/Chartered Banker Institute we have no statutory or regulatory powers. However, we are regulated by the QAA in relation to our Taught Degree Awarding Powers, are an Ofqual accredited awarding organisation and an FSA Accredited Body in respect of the issuing of Statements of Professional Standing (SPS) to retail investment advisers.
As a result we have very clear disciplinary and malpractice procedures for all students, members and SPS holders, as well as a code of conduct and clearly defined ethical standards.
In addition to this, where the conduct of a member may bring the reputation of the ifs into disrepute we have taken informal action, such as that suggested by Commission Chair Andrew Tyrie, to request that a member resign his or her membership. On the very small number of occasions we have felt it necessary to pursue such a course of action, the result has been positive ie the member has resigned with immediate effect.
It is worth noting that fitness to practise is a matter for the regulatory body ie the FSA and even if an individual is struck off from our membership they remain at liberty to continue to work in the industry unless the FSA deems otherwise—a significant distinction from several other professional bodies in the legal and medical professions.
The Commission will doubtless be aware that dismissals and suspensions by the FSA have hit a five year high with 1,373 workers being sacked for disciplinary reasons in 2012 (a 76% increase on 2011) which suggests the regulator may now be taking these issues more seriously.
Student Numbers
Lord Turnbull suggested that a decrease in membership numbers at a time when the number of those employed by banks had increased was “shameful”.
This ignores evidence in our 2012 submission to the Commission that in today’s complex financial services industry, that demands increasing specialisation, the term “banker” could be used to describe a range of individuals in a bank performing a very wide variety of different roles having achieved professional qualifications from a variety of professional bodies.
Furthermore, whilst the quality of our offering and reputation of our organisation ensures we maintain a relatively strong membership base in excess of 20,000 individuals, the total number of students currently enrolled on one of our programmes is more tha·n double this figure at approximately 50,000 (this figure does not include the 40,000 teenagers who participate in our annual investment challenge over a four month period).
This success can be largely attributed to the fact that, unlike most other professional bodies, we do not insist on membership in order to study with us. Whilst membership provides a range of benefits, we believe that improving knowledge, skills and confidence through studying and Continuing Professional Development should be the key focus.
Codes
Once again it must be stressed that codes are cultural within an organisation. As made clear during the oral evidence session earlier this month, you can have as many codes as you like, but people will still break them.
Most professional bodies and every major UK bank have a code of conduct. They are all broadly similar and they have all been in place for many years.
The creation of a single code of conduct for bankers via a standards board is unlikely to make any discernible difference to the behaviour of bankers. Lord Turnbull disputed this but in the following evidence session attended by the BBA’s Anthony Browne, Lord McFall of Alcluith acknowledged that codes of conduct were “worthless”. He went on to state that banks, “...have these codes of ethics; they look good in their annual report, but there is always an escape clause.”
The Commission implied that having a conduct code independent of the banking industry might improve matters. However, this has already been achieved in part as the Banking Conduct Regime commenced on 1 November 2009.
This Conduct Regime applies to the regulated activity of accepting deposits, and replaced the non lending aspects of the Banking Code and Business Banking Code (industry-owned codes that were monitored by the Banking Code Standards Board). The Regime includes a new Banking Conduct of Business sourcebook (known as BCOBS), which contains rules and guidance.
Indeed, the ifs has specifically designed a number of qualifications to develop skills and understanding in the area of customer service, and to help UK retail financial services providers embed the FSA’s revised framework for the conduct of retail banking business within their organisations.
These are the Certificate in Retail Banking Conduct of Business (CertRBCB); Certificate in Business Banking and Conduct (CertBB&C®) and Diploma in Retail Banking Conduct of Business (DipRBCB®). These recently developed qualifications have been taken by almost 6,000 frontline bank staff and, as our previous evidence submission indicated, we expect this number to more than double over the next 12 months.
We agree that it is essential that the issues of behaviour, culture and ethics are addressed, but we do not believe that codes of conduct are a useful means of achieving this. Instead we believe that ensuring all bank staff are appropriately educated will prove much more effective.
We recognise that appropriately educating an entire workforce takes considerably longer than the simple establishment of another code of conduct but are certain that the medium to long-term rewards for consumers, the industry and the economy will be far greater.
Training v Education
There appeared to be some uncertainty about the distinction between training and education and we would like to help clarify this issue.
A professional qualification is an assurance that a student has met rigorous, peer-developed and quantified standards through testing, endorsed by a regulated and respected awarding body. They confirm that knowledge has been acquired through learning.
Training and training courses are a step along the same path, knowledge or skills are taught, students learn and acquire knowledge. The difference between training and qualifications is proof of learning; training infers it through participation, qualifications certify it through structure and independent, rigorous testing.
Training does not differentiate between students who have understood and digested the learning material into knowledge, and those who have not. Even if some form of testing is part of the training, it is not done under the same rigorous conditions that qualifications are, and therefore their results cannot be judged with the same degree of confidence or certainty. Above all, training programmes are almost always focused on internal processes and procedures, often relating to sales and promotion techniques and building customer relationships. They are corporate specific and do not provide the wider contextual knowledge and understanding that comes with a proper qualification.
There are intrinsic benefits to qualifications. They are recognised and respected by the individuals taking them and those looking to employ them and they enhance self-awareness and self-confidence which allows employers to increase productivity and attract a higher calibre of staff to drive better organisational performance.
Common Standards
Mark Garnier asked if the ifs has, “...a commonality of culture and standards...specifically, do [we] teach people who are working in the banking sector-albeit there are different parts within it-what a bank actually is and what the overall requirements are in terms of standards and culture?”
As confirmed during the oral evidence session, we do provide a core of knowledge for all students regardless of whether or not they specialise. As requested, module summaries for our core learning materials are enclosed. These are the fundamentals of leadership and management, financial markets and risk and retail lending.
24 January 2013