/ Money

Will George Osborne make a Big Change in banking?

George Osborne via altogetherfool on Flickr

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?


Well after switching CASH ISA provider and the money disappearing from the planet for the full 15 days. I doubt Mr Osbourne will go far enough. Why do I say that, well the rules are banks must transfer a cash ISA within 15 days, but nowhere in those rules does it make the banks leave the money in my account, so any rules he comes up with now, won’t be rigorous enough.

My old account was closed 21st May and is credited in the new account on 3rd June, and that’s with the current rules and they stink.

Our instincts are to scrap the present banking system because of the disastrous actions of a few people. Big changes rarely work – look at the mess the NHS is getting into. Organisations and businesses evolve, with many of their practices soundly based on experience. The trick is to pinpoint the real deficiencies and address those, not wipe the slate clean and do a wholesale reorganisation. No one person or committee can possibly have the background, knowledge or experience to reform a big organisation in one fell swoop – it will take time. So an intelligent pruning and adjustment, carrying the mostly-honest workers along, could be the best approach.

richard says:
13 July 2013

Well to answer the question – then NO – Osborne is too much in the pockets of the banking people – the banking people are not interested in change.

It would be like a thief investagating another thief

Pietr8 says:
13 July 2013

The government makes too much money out of taxes to mess about with the banks too much. We all benefit from that but there is so much envy in the population that they only see the fat cats and the influence the banks have on MP’s and their customers.

It’s not something we can regulate on our own, it’s an international problem.

The major problem is the high commission paid to star staff who take risks, the gambling section, and are then able to walk away from losses leaving us to pick up the tab.

Ideally the gambling should be separated from “traditional” banking. The problem then is that borrowing costs for the gambling would then escalate and make it uneconomic. The loss of that business would mean a substantial reduction in the tax take.

The banks were proud that they had “barrow boys” running the gambling. They, and the top directors should have to take more responsibility since at the moment it’s the rest of the population who suffer.

In addition banks should be encouraged to move away from reliance on property values as a back up to lending. Many small businesses have little value in property which makes it difficult to borrow when they need to expand. GDP growth will come mainly from small business.

Perhaps as well as tackling overpaid bankers we should remember there are civil servants who appear reckless with our money and are rarely taken to task or penalised. The FSA let us down badly in not monitoring banks adequately. Wasted money on MoD contracts, NHS computer system, fire service centralisation, NHS purchasing, lack of monitoring of suppliers – like offender tagging, back-to work schemes that don’t………. What we need to think about is whether these are all – banks, public bodies – incompetent, dishonest, or because it is dealing with other people’s money, feel less responsible. Tackling the root cause might be better than just assuming all these individuals are totally at fault. If you work for a private company and foul-up. you possibly lose your job, the company share price may fall and there are personal consequences. Perhaps loss of job without severance pay is the best way to encourage responsibility?