/ Money

Could this be the turning point for real change in banking?

Bank signs

The government will today respond to the Independent Commission on Banking’s (ICB) recommendations to reform the banks. It’s a once in a lifetime opportunity, but banks shouldn’t wait to treat their customers well.

We talk a lot about banking reform at Which? – and I mean a lot. But it’s with good reason. Banking services are vital to our everyday lives. So, when things go wrong, it can be disastrous on an individual level and for the wider economy.

In George Osborne’s response to the ICB’s recommendations, one of the key things he’ll announce are plans to separate retail banking from more risky investment activities. Otherwise known as ‘ring-fencing’, this is something both we support and, from the comments made here on Which? Conversation and at our ‘Your Voice’ events, consumers support it too.

Ring-fencing would mean that, if the investment bank was at risk of failing, the retail banking services upon which most of us rely wouldn’t be harmed. Theoretically, this would reduce the likelihood of a massive taxpayer bailout, as seen in 2008.

Customers need to have their say

One of the things we’ve been particularly vocal about is the missing voice of those most affected by the banking crisis – the consumer. So, in advance of the government’s announcement today, we carried out research to find out what people think about reform and how soon it should happen.

We found that when it comes to banking reform, almost half feel the government prioritises the opinions of banks over everything else, whether that’s consumers, businesses or regulators. That’s quite a depressing statistic, but somewhat understandable when you consider the power of the banking lobby and the distrust people feel in the banking sector overall.

We also found that only one in five people are confident that the government will actually reform the banking sector. Perhaps this is a wake-up call for the Chancellor to keep his promises and stick to a robust reform agenda.

Impatient for change

We’re no doubt ready for change. In fact, most people are impatient, with the vast majority (94%) wanting banks to make significant changes within five years, and two thirds wanting to see reform in the next 12 months.

That may sound like a big ask, but if banks think the old chestnut of ‘it’s too complicated to undertake that soon’ will wash with the public, they should know that almost 57% of people don’t think that’s a valid reason for holding back.

Moreover, half of the population doesn’t think the potential cost of change, or arguments that other countries aren’t doing the same, should prevent reforms going ahead either.

Banks can make changes now

As for Which?, we think the government has a once in a lifetime opportunity to reform the banking industry, restore consumer trust and prove it hasn’t let banks off the hook.

And aside from that, banks don’t need to wait for the government to change the way they carry out their business. We’re all bearing the cost of the bank bail-out – £2,000 for every man, woman and child has been injected into the banking system, with £5 billion a year in interest payments. Don’t we deserve a bit of payback now?

Banks have the power to develop value for money products now. They can sort out their complaints handling practices and deliver a service that will go some way to restoring trust in an industry that’s let us all down. How about delivering some of that as a New Year gift to their customers?


British Bankers’ Association here. We know we have a lot of work to do to restore confidence and trust in the banking sector. And we would be keen to understand more about the questions you asked in this research. Did you really find that “almost half [of respondents] feel the government prioritises the opinions of banks over everything else, whether that’s consumers, businesses or regulators”? Because we don’t know of any bankers who would agree with that, let alone MPs. Why would the opinions of banks not include the interest of consumers, businesses and regulators? Consumers and businesses are their customers, and regulators make their commercial activities possible.


Basically because past experience shows the only thing Banks are interested in is their own profits and bonuses – not the interest of the country.. That is why they have lobbied for reductions in regulations – ignored protests about bonuses – and been irresponsible in dealing with mortgages for years.

I certainly agree with Which? that “we feel the government prioritises the opinions of banks over everything else”

Why is it that the lifeblood of banks namely savers – are treated so shabbily ? My tiny “savings” interest have dropped by 90% since the credit crunch – There is no incentive to save in this country now.by banks – Nor is there any incentive by the “government” – rather curious???


We asked members of the public about whose opinions they think the Government prioritises, and think it is fair and reasonable to ask people directly what they think. We wouldn’t assume to be able to represent what people think without asking them directly and then reporting it. If public opinion is valued and listened too, then perhaps the challenge to the industry is to prove that.


First off, it’s good that you are talking to us minions, the people, but are you listening?

I am in a minority in the UK whereby I do not blame the banks for the bail out at the taxpayer expense. You are a business and as such your members operated to the letter of the law and rules set by the previous government. Had those laws/regulation been in the hands of the B of E, I suspect we wouldn’t be in half as much of a hole as we are in now.
That said, there are some things that your association and members should answer the public on.

* “We know we have a lot of work to do to restore confidence and trust in the banking sector.”
Sounds suspiciously like the same approach of the major players in another industry that the public are being kicked by, the energy industry.
The similarities in a total lack of regulation are also what is puzzling the public, why we are paying millions of pounds each year to regulators which are contradicting themselves and not acting in cunsumer’s interests?
Is it not time for the “jobs for the boys” to stop?
I want to see people not connected high up with banks sitting on the FSA and the FOS. Those at the FSA have already stated that they failed to regulate, would the BBA not agree?
Does the BBA not think that it is time the regulators got their act together, instead of “working with” banks, started standing up for us?

* “Why would the opinions of banks not include the interest of consumers”
Where is the “interest of consumers” when a former head of the BBA sits before a parliamentary select committee and lets slip that the level of bank charges placed on any given bank’s consumers, are not charged at a level that individual account holder has actually cost the bank?
Where is the “interest of consumers” when the banking industry, along with the BBA, do their level best to delay, stall, fight, the very same consumers whom are within their right to be provided with a breakdown of any given bank charge or failing this, a refund of the said bank charge?
Banks are recovering the losses they incurred during the previous financial year, using bank charges on consumer’s accounts, does the BBA believe this is a fair practice?
Do you disagree with my view, that a bank’s losses incurred in any given financial year, are [mostly] the bank’s own fault as a result of bad lending and as such, that bank’s consumer’s bank charges, should not be used to attempt to recover such losses?

Despite common law in England and Wales and legal precedent, on charges being deemed to be a penalty, your members today, continue to charge consumers accounts at levels that do not reflect “actual loss”
Only two weeks ago, I assisted a high street bank’s customer in the recovery of £140 worth of bank charges issued, for an unauthorised overdraft of just £7, which covered just 5 days.
This was only present because the bank “reused” funds set aside for an authorised card payment to pay a direct debit, so instead of just charging for a non payment of a direct debit, the bank issued charges for unauthorised card payment (which was authorised by the bank) plus an unauthorised overdraft fee, which together, raised more money in charges for the bank – [which is a direct breach of the fraud act, but that’s for another post]

There are a list of examples longer than my arm, from all types of bank consumers, that have been let down by their bank, which is supposed to be working in their interest.
The banking industry have been given a prime position by government, with each and everyone of us having to change the way we shop/pay bills/receive benefits, receive wages, to the point that it is almost impossible to avoid having a bank account of some kind. All the banking industry has done is use this to gain at consumer’s expense.
Your members charge us for anything and everything.

I suspect your posting may well be nothing more than hot air, but I shall reserve judgement until I read your replies for amount of questions and statements you are sure to receive on here.


Thanks for the article and a chance to rant. Where do I start? The city of London is living in a bubble.

Whilst the financial sector paid itself £17billion(2010/11) in bonuses those at the bottom end of society were being asked to bear the brunt of the recession. This disparity will ensure nothing but disdain for ‘greedy bankers’ at the top, and disillusion with politicians who fail to curtail the city excesses.

We learn today big business(read Banks) employ tax experts to ensure they pay proportionately less to the exchequer than other sectors and have the nerve to tell us that if they don’t pay their top people (who got us into this mess) astronomical rewards we shall lose them. Ha! Let them go. What happened to market forces when companies fail? How do we manage to keep top brain surgeons without throwing million pound bonuses at them every year?

We are witnessing Captilism under trial and things have to change in the City. A pity the City hasn’t quite noticed yet.

David H says:
21 December 2011

The BBA’s tone tells you all you need to know about the banks, their attitude and how many million miles away they are from restoring trust.

johnco says:
20 January 2012

If BBA want an example of the disgraceful conduct of a bank, I would be happy to oblige. The story starts with falsehood, telling a customer that she could not open a specified account at HSBC without going through a financial adviser, and then selling her a totally inappropriate in house product instead. As she was 70 years old, in poor health, and with no financial expertise, and English is not her native language, she was an easy target. It took nearly two years (going through FSA who did not distinguish themselves!) to get back the money invested. Complaints were ignored and correspondence went unanswered until we had to contact FSA, and even then the process was dragged out until my wife was so dispirited that she no longer had the strength to fight on. It was deceitful and irresponsible for them to baulk a customer’s attempt to open a chosen account, and steer them to an in-house product which favoured the bank at the customer’s expense, with no other options offered. It should be illegal for banks to describe their “in house product” salesmen as “financial advisers”. I have all the documentation to prove the above, and would be happy to enlighten BBA as to the ugly side of high street banking, for which much tighter and effective regulation is long overdue.
Even interest rate manipulation is aided by the fact that banks are not legally obliged to show the interest rate being paid on all statements and relevant correspondence. To find that an interest rate of 2% on an account has been surreptitiously ratcheted down to 0.05% borders on criminal deception!


fanatastic article Lucy. The BBA should not underestimate the amount of work the banking sector has to do in order to regain the trust and confidence of the public. Anything the government legislates for, the industry should take as the minimum and go even further. Many people’s lives, careers, well-being, prosperity and happiness – including their own shareholders – have been turned upside down as a consequence of irresponsible [if not immoral] banking practices. The industry should collectively hang its head in shame, not answer back to Which? with some petty gripe about its reporting of public opinion. Roll-on the reforms. Expedite them. Let there be a race to excell. Grasp the spirit of the Olympics and deliver for the people of the UK. The government must stand firm. The banks tried to abolish cheques but they were caught out and couldn’t get away with it. Sitting on their deeply-padded bonus cushions and sheltered from the icy blast of customer reaction by their expanding margins they just don’t get it do they? – So all power to Which? Go forth and crucify.

anon the mouse says:
20 December 2011

to the BBA rep,
Why is there no trust when it comes to banks. Four words for you “Too big to fail”. No other industry in the UK has been called too big to fail.

Steel, mining, car production, all big industries all pretty much gone from these shores. Look at the list of high street companies that have failed or are on the verge of collapse, (HMV this week), all have been allowed to go to the wall, with no government bailout. Only banking has been given this state funded, tax payer hated payout.

There is resentment amongst most people I know because if we ran our finances like the financial institutions did/do we would be penniless, homeless, and with no help from the government to get out of our own mess.

Promises of more lending as it was taxpayer money, guess what, it dropped sharply as the banks shout “Mine, mine, mine” like the seagulls from Nemo. It was dangerous, greedy, unethical practices that took most of them to the edge of collapse. excluding HSBC of course.

So what was so special about the banks that they were given this free pass?


Interesting to see someone try and defend the banks.

You say “Why would the opinions of banks not include the interest of consumers, businesses and regulators?”

Has the BBA been asleep the past decade; PPI , HSBC owned company misselling products to the elderly for 5 years. Banks see consumers, businesses as cash cows nothing more.


Bankers will never be trusted by the public until they stop paying themselves huge bonuses. They should be salaried with no more than a maximum of around 5% added only as a bonus when appropriately earned for genuinely outstanding work. The argument that they would all go abroad if the huge bonuses were not paid does not wash with me.


It would appear from the BBA post that the bankers have learnt nothing from the past four years and they’re surprised nobody trusts them? They pushed for lighter regulation, we can regulate ourselves without government intervention, they claimed and yet when it all went pear shaped who did they expect to rescue them? You can’t have it both ways BBA, if you expect the taxpayer to step in and prop you up in the future you have to play by our rules.

PaulaC says:
20 December 2011

I think Government prioritises votes/voters over anything else, that it values the tax revenues produced by banks and needs to tread a fine line between nurturing the latter whilst working on the popular assumption that the former blame the banks for the poor state of the economy. The whole thing is a strictly commercial relationship for me – some banks are useless/arrogant and probably don’t understand their retail customers so couldn’t represent their interests (four or so years ago, with some effort, I switched from one of these) and some are doing reasonably well – certainly I feel like I get better service in my bank (and would from most high street banks) than from most large retail chains (where I’m pretty fed up of staff who prioritise their colleagues and the store’s IT systems before they choose, if at all, to interact with me). Interestingly, even though I quite like my bank, it has never asked me what I want/think (other than to try to sell me stuff). I don’t care what banks pay their staff, that’s for the job market to decide, and actually rather wish someone in Careers Advice had actually told me “investment banker” was a job option – any of us could have been/be one, with intelligence and hard work and long hours/stress. I do care that banks run themselves so as not to require Government bail-out and that is for Government and the banking industry to nail between them and incorporate into regulation.

John in England says:
21 December 2011

When a ‘customer’ puts their money into their account, the bank can lend up to 10 times this amount at around 20%. The customer will be lucky to find an account that pays over 3%.
Given that inflation is around 4.5%, the money depreciates in real terms.

When I asked the Regulator why banks were allowed to give such a low return I was sent a link to a list of bank’s interest rates that they had googled. None of the interest rates were above the inflation rate and I failed to see the logic in trying to dismiss the argument in this way.


Interesting that the BBA has not yet replied – somewhat similar to their attitude to our complaints over the years –

So we need far stricter regulation as that is the only thing the banks understand – we also need far more transparency in their dealing – with far more power to the overseeing body.

Anne Sharp says:
22 December 2011

I think ring fencing misses the point. Northern Rock was not an investment bank yet was the first to be bailed out as a result of its agressive and reckless lending polices and the drying up of liquidity in the market. RBS almost failed for a whole myriad of problems not least of which was the takeover of ABN Amro and poor decision making in its retail division, rather than its investment banking activites. LLoyds TSB also is not an investment bank. These changes will do nothing to prevent poor decision making and agressive lending in the retail sector.

Penny says:
22 December 2011

Ring fencing is a politician’s word; it has no meaning in technical legal, accounting and economic definitions of different types of banks and banking systems. For this reason the devil will be in the detail and that is unlikely to provide the kind of reassurance we need going forward. Some alternatives to ring fencing include:
1. 100% banking–this means that any money lent by the bank is its ‘own’ money, not that of depositors. This was the right-wing solution to the 1930’s banking crisis and proposed by I Fisher, the originator of most of the ideas Milton Friedman claimed to invent.
2. Narrow banking–this means the bank’s scope of activities is very narrow, including a very tight limit on the multiple of bank capital that can be lent (aka leverage).
3. Partnership investment banking–if bankers were partners, they would be forced to bear the risk of their decisions (as once was the case). Its entirely possible to revoke ‘banking’ charters to the investment banking part; very carefully guide the casino business into partnerships and restore the integrity of the banking system.

Currently, the proposed ring fencing will still give banks access to most of the monetary base; this provides them with extremely cheap capital; they will argue that if they lose access to this, they will need to charge directly for services such as current accounts. The government has not answer to the logic of this request because there is no settled economic or regulatory concept of ‘ring fencing.’ Its rather like Cameron’s idea of the ‘big society’–its means nothing and everything all at the same time. For this reason, some sort of compromise will be proposed which restores the status quo ante.

Robin says:
22 December 2011

Rightly or wrongly customers have always assumed that their deposits are safe in the hands on the banks. Surely that is one of their primary objectives. Unfortunately the whole concept of fractional reserve banking is flawed and effectively gives the banks a free hand to game the system with amounts of money far in excess of any assets they themselves actually own. Regardless of what the fine print in law says the current banking system is ultimately immoral. More to the point it is effectively insolvent.

The modern banking system was not created for the people – it is a business. Although overdue the balance must now shift to the benefit of the masses in a fair and equitable manner. Clearly the unbridled greed of those big Corporations currently struggling to remain on top must end.

There need to be changes so that customer savings are ring fenced and not available to the banks for leverage and gambling. Interest charged on Loans should reflect their true cost and not be used be as a revenue stream to stave off insolvency in the vain hope, given time, everything will be alright in the end. That is not a very probable outcome looking at the current situation in Europe or indeed globally.


“The modern banking system was not created for the people – it is a business. Although overdue the balance must now shift to the benefit of the masses in a fair and equitable manner. Clearly the unbridled greed of those big Corporations currently struggling to remain on top must end”

A major issue I have with banks Robin, is their position within society (if one exists).
Under the last government they were handed unprecedented powers.
They ceased to be just a business, becoming a major service provider at the government’s choice, in effect they were handed a huge portion of the post office’s business.
This was fine initially, but as regulation and protections for people fell away (for reasons that today I still cannot understand) how did the banks respond?

As we now know, they introduced the services and then steadily increased their charges for them, post offices whose business they now had, closed down in record numbers. Bank’s then started to close branches, some of which are lifelines for communities and people who have no access to transport of their own etc.
With such an increase in customer base, the profits from minimal charges for services would have been more than enough for a healthy growing business.
Given the temptation of all the extra custom, new information that could be analysed and sold on and increasing costs of borrowing, the banks got greedy. Customer’s were left in an unacceptable position of being forced to use banks for wages, bills, etc, or face charges for paying them over the counter at the post office.

We’ve seen in recent times, banks attempting to end cheque guarantee card system, pushing customers on to debit/credit cards for which charging often applies (even at levels far and above the “actual cost” involved)
I agree entirely with your statement – banks have a moral responsibility to the people of the UK, more so after the advantageous position they find themselves now in.

Regulation and laws should be introduced with immediate efect and control should rest with the government of the day, whom can be voted out at the ballot box.
As for the FSA and the government in power who allowed this to happen, the FSA members at the time should be sacked. Named and shamed as well.
Those in office who instigated this transfer of financial powers and removed the choice of the people, without putting safeguards in place, should be shamed and never again be allowed to stand for public office.

Extreme, yes, but the best deterrant for all who wish to represent the people of the UK, just as the banks should have been left to go under, like European laws dictate, no protectionism.


I am totally disgusted at the behaviour of the Banking Industry their irresponsible conduct has endangered our economy and still they continue to pay inflated salaries to their executives and bonuses. For over 30 years I was employed by a Building Society and one of the most satisfying aspects of my job was assisting clients by arranging their mortgages. The nature of mortgage lending changed dramatically about 10 years ago when the Banks decided to operate self-certification mortgages which in my opinion most certainly was not assisting their clients and actually bordered on criminal by actively encouraging people to over commit themselves. Interest only mortgages with the only security for the lender being the mortgaged property is in effect glorified renting and added to the risk for borrowers of losing the roof over their heads. In short the Banks should return to responsible lending, bonuses should be abolished if employees believe they are helping customers that together with a fair days pay should be sufficient reward and to say bonuses must be paid or the country will lose the Banking Industry “Brains!” is nonsense where are they going to go? the Euro zone I think not America where all this nonsense originated I think not again!

Andy Finch says:
23 December 2011

If the banks really want to restore public confidence, they must ringfence customers’ money from their investment arms IMMEDIATELY. Trust has to be earned by positive action to demonstrate which side they are on. We don’t object to banks taking risks, if they are prepared to accept the consequences of any bad decisions they make. If they are not prepared to ringfence customer deposits immediately, this demonstrates the truth that their investments are both dependent on (and structured upon) customer deposits! If this were not the case, there would be no reason NOT to do this!
It is clear therefore that unless ringfencing happens, we are ALL at risk, YET AGAIN, from a further banking collapse. Spinning it out over a number of years probably means that we will be too late to avert the impending and inevitable collapse of the european banking system under the mountain of ever-increasing and unsustainable debt which will cause this to happen.
It is better to face an unpalatable truth NOW and take action ourselves, as individuals, than rely upon the obfuscating palatable untruths we are being fed by the banks and our political masters.

Penny says:
23 December 2011

We should demand the following definition of ring fencing:
Savings should be insured ONLY if they are held in the accounts of dedicated savings banks (narrow banks) controlled by National Savings and Investment.

IT would be most amusing to hear the response of the BBA to this one.


The idea to change in 2020 is insulting. We all know what havoc might be wreaked by the greedy cheats by then.


Ordinary Citizen here. British Bankers’ Association if you and your whingers really want to help get the UK (Pre-Thatcher known as GB-Great Britain) out of the mess you got us into. Why don’t you pay the Inland Revenue what you really owe them, and further more make a huge voluntary contibution towards cutting the deficit, you can afford it. Of course I realise that this may make a dent in the contributions that certain political party receives, but ‘what the hell’ they will still be your lapdogs.


BBA posted 19th dec – still no reply to the points raised by the 26th Dec – must have longer holidays (to spend their bonuses??) than the rest of us — or more likely – not listening to us at all – Simply a PR exercise in the hope of persuading the more gullible public they care – Total rubbish.

If there was another simple method of handling my cash – I’d use it. Or if there was a more ethical method – I’d change instantly.

What I need is a bank that offered a safe guarded deposit – on-line use – a current account that uses the interest accrued on the account to pay any bank charges – .The ability to use all ATMs without charge.
Any offers??? I thought not.

It is getting to be cheaper and safer to simply hoard your money at home somewhere safe.- like underneath the floorboards –

So how about it BBA answer the questions??


“What I need is a bank that offered a safe guarded deposit – on-line use – a current account that uses the interest accrued on the account to pay any bank charges – .The ability to use all ATMs without charge”

Sounds good to me, shame you’re not on the board of the FSA Richard!

Penny says:
27 December 2011

Frugal ways wants the kind of bank account offered by ‘narrow banks’–these are banks who invest ONLY in government securities and so cannot fail –this is the only type of bank that cannot fail depositors.
An alternative kind of bank would be one in which depositors money can only be invested in government securities. The owners of the bank, however, are free to lend THEIR OWN CAPITAL to whatever purpose they wish. They cannot use depositors money. This is called 100% banking and was favoured for many years by right wing economists like Milton Friedman.

Why will BBA oppose the first (narrow banking)? Obviously, bankers bonuses depend on using other people’s money and as no sane person would lend them any (check out what is happening to bankers issuance of bonded debt) any reform which tries to take away their control of savings, wages directly deposited into a current account, transactions money held via credit cards, etc…will be opposed.


Narrow banks, etc, doesn’t really concern me Penny.

I’d like to see banks that act in a resposible manner, given the priviledged position they have been allowed by governments.
For example, anyone with bank charges are told “to manage their account better” yet if I put in writing to a bank, that should there be no funds in my account for any transaction, it should be declined, my instructions are ignored.
I am told to manage the account better, the bank are supposed to represent my best interests via that account, but when there are profits to be made, this ethos/law or whatever, goes out of the window. It bewilders me why no government/regulator has stepped in to stop this?

Another glaringly obvious problem, is how banks reuse funds from accounts.
If I have £20 in my account and I purchase something using my card for £10, whether this is cleared via authorisation or the bank’s agreed “floor limit” with the company, the funds were in the account at the time I made the purchase.

Now if a direct debit for £25 is called for in the next 3 days, the bank will pay the direct debit, despite funds not being in the account, using the £10 in the account and the £15 taken from the balance for the card transaction.
When the card transaction is called for, it is paid, as it has been already authorised by the bank. The bank then issue charges for unauthorised overdraft and an unauthorised card payment, which results in a higher charge than if they had managed the account correctly and not paid the direct debit.

Can I reuse money set aside from my balance for the card transaction for other purposes? No.
Did I give the bank permission to reuse money set aside for other purposes? No.
If I went into someone else’s account and rejigged their money around without permission, so that I made financial gain at their expense, I would be arrested for fraud – so why not the same for the bank?

In previous years it didn’t matter so much as people had the choice to use other means to pay bills, get wages/benefits, etc, without the need for banks. In today’s “convenient” we have no choice but to use a bank.
Where is the risk for the banks? From where I’m standing they cannot lose, they succeed they get rewards of huge profits, they fail they get huge taxpayer bailouts that are/or will be, written off.

frances says:
2 January 2012

“When a government is dependent upon Bankers for money,
they and not the leaders of the government control the situation,
since the hand that gives is above the hand that takes ………
Money has no Motherland; financiers are without patriotism and without decency …….
their sole objective is gain.”

Napoleon Bonaparte, 1815.


It is all very well to talk like this. I agree bankers should not be paid any bonuses let alone these obscene amounts that seem standard. However anybody in the past who has tried to change the system and to nationalise the banks and print their own money seems to have died a sudden death. A most famous one is Abraham Lincoln. The banks are controlled by a few families who do not even appear on the rich lists and are not about to give up their wealth for any government.