/ Money

Why shouldn’t bankers play by the rules?

A judge's gavel and block

The majority of people have told us they want bankers to be bound by an independent code of conduct. So we’re calling on the government to create one, and make it a legal requirement for all bankers to follow it.

When people ask me what kind of banking reform we’re looking for at Which?, the first answer that always comes up is that we want to see a code of conduct implemented for bank staff.

After all, doctors, accountants and lawyers have codes of conduct to follow, so why aren’t bankers held accountable when they break the rules?

We’ve lost our trust in banks

We’ve released research today that found 86% of people agreed that the banking industry needs an independent code of conduct to regain public trust. The code should outline the expected professional and ethical standards for bankers, so we’re calling on the government to make the code a reality via the Banking Reform Bill.

Trust in the banking industry has hit rock-bottom. Our survey found that only 6% of people think bankers act in their best interests now, compared to 9% in August 2012, immediately after the LIBOR scandal.

I know that every time I open the paper, it feels like I’m reading about something else the banking industry has done wrong. In the last year we’ve seen IT failures, the LIBOR rigging scandal, and more millions set aside for mis-sold payment protection insurance (PPI).

So it might not come as a surprise that a mere 4% of you think that bankers are likely to act ethically. In addition, only 22% thought that bankers would be removed from their jobs if they lied or cheated. However, 93% of you said your trust in the industry would increase if bankers were struck off for wrongdoing.

We need a legal code of conduct

There’s clearly something wrong in the industry when, following the huge PPI mis-selling scandal, the only senior executive to be disciplined by the financial regulator was the chief executive at Land of Leather!

We think that a code of conduct, with a basis in law, is an important part of changing banking culture and restoring people’s trust. If a customer or an employee of a bank thinks a member of staff may have breached the code of conduct, they should be able to report them to an independent body. This body should be able to punish or strike-off bankers that have broken the code, including those who have acted dishonestly or have knowingly mis-sold a product.

The Parliamentary Commission on Banking Standards is expected to release its report on banking culture next month. We want it to recommend that the government implements a code of conduct for bankers backed by law, to make it a code with real teeth.

What rules or principles should be included in a bankers’ code of conduct? How can the banks regain your trust?

Phil says:
19 April 2013

A proper code of conduct is the easy part. What’s really needed is proper enforcement which successive governments have failed to provide. What’s wanted is something akin to the Securities and Exchange Commission in the US which hands down some proper fines and prison sentences not the feeble slaps on the wrist British bankers and business folk have got from the FSA.

In the US, bankers tremble at the thought of being investigated by the Securities and Exchange Commission because of their powers and the consequences if they are in contravention. Our w/bankers get to appear before a Commons Select Committee, walk away with millions in bonuses and big fat pension pots whilst our pensioners are lucky to get £5k a year pension.. That is probably unfair as some w/bankers also have to return their knighthood – big deal – and what a severe punishment but they can live in luxury on their huge salaries and bonuses whilst our pensioners shiver in their freezing homes.

Jayne Bellis says:
19 April 2013

Retail banking should be subject to the same rigorous systems of regulation as financial advisers.

Jon Welsby says:
19 April 2013

This is the kind of thing that could really change the banking world for the better

Organisations like the FSB and Bully Banks could assist with the structure or even govern it

Great idea

I like the latest European (EC) “take”and possible proposals on the hierarchy of responsibilities with regard to bank debt and failure, ie that it is shareholders first, bond holders second, unsecured investors third, BUT then it falls down by citing secured investors next and not mentioning directors and senior employees at all ! (who are the guilty executive parties who should suffer IF their actions fail the bank).
So lets see Bank executive directors (who approve the risky business) FIRST to pay, followed by the Senior Managers (who propose and work with the risks) SECOND, and only then shareholders etc. Perhaps then there will be a BALANCE of Risk, Reward and penalty for failure in our Banking system.

I see from today’s news that Barclays has set aside £500 million in case they are found guilty of rigging currency markets. They have also set aside £170 million to compensate customers who were mis-sold PPI. Incredibly, Barclays shares have risen by 2%.