The government has shared its plans for banking reform, following its much anticipated report into banking culture. But will the Chancellor’s reforms make sure banks work for customers, not bankers?
George Osborne set up the Parliamentary Commission on Banking Standards (PCBS) to suggest ways to fix our broken banking culture, making the decision in the wake of the damaging Libor rate rigging scandal last summer.
We’ve been through months of delays and more than 150 hours of parliamentary evidence sessions. But at last, the final report from the PCBS has been published.
And boy – did it make a lot of recommendations! Overall, there were 571 pages worth of suggestions, comments and criticisms held in the report.
And now, the government has published its response to the PCBS report. It’s set out which recommendations it will accept, some of which will make it into the Banking Reform Bill currently working its way through Parliament.
More competition and accountability
So what’s the good news we can take from George Osborne’s response to the PCBS report?
To start, the government will introduce a new Senior Persons Regime for those working at the top of the banking chain. The regime will make sure that those people will be held personally accountable for failures such as mis-selling scandals.
Criminal sanctions will also be introduced for senior bankers that take reckless gambles with our money. In fact, the government has said it will create a new offence of ‘reckless misconduct in the management of a bank’.
In addition, the government has agreed to create a target for the Prudential Regulatory Authority (the regulator responsible for supervising the banks), to promote competition in the banking sector and improve choice for consumers.
Punishment instead of prevention
I wish I could say it was all good news, but there are definitely areas for improvement.
While the PCBS report and the government’s proposals are strong on punishment, we think they’re weak on prevention. At Which?, we’ve been calling for a code of conduct for bank staff that is completely independent of the industry, like the ones that doctors and accountants follow.
Instead, the PCBS has recommended the introduction of a Licensing Regime, to license all but the most junior of bankers. It will be underpinned by Banking Standards rules that all licensed bankers must follow, and any breach will be recorded on a register. However, we’re concerned the regime will fail to promote and enforce ethics in the industry.
In addition, a new Payments Regulator will be introduced next year, which the government will ask to look into introducing Portable Account Numbers (PANs). While this is good news in itself, we’re disappointed that the review is unlikely to even begin before the end of 2014, meaning we’ll have to wait a long time before any potential changes could come into effect.
What do you think of George Osborne’s plans to reform the banking industry? Will they be enough to restore your trust in the banks?