/ Money

In bankers we’ve lost trust

Consumer trust has all but gone from the banking industry as our research shows you’d put estate agents, builders and accountants above bankers in terms of trust. What can the banks do to regain your trust?

I’ve lost my trust in the banks, but it seems I’m not the only one. In our survey, we found that only 11% of Brits still trust bankers to work in their best interests – that’s less than lawyers and estate agents. To put that in context, here’s a table of professions rated in order of most to least trusted:

We also found that only 26% of consumers thought that lying and cheating would lead to individual bankers losing their jobs, compared to 73% for nurses and 68% for doctors.

In addition, just 29% of consumers thought that bankers would lose their jobs for failing to comply with the industry’s code of ethics, compared to 79% for nurses and 78% for doctors.

The results of this survey aren’t too surprising, but they are very concerning. How can it be acceptable for just 11% of people to believe that our money and economy is in safe hands?

Our survey also found that just one in ten people think that bankers are well regulated, with only one in five believing that bankers are properly trained and qualified.

Many Convo commenters have shared their frustrations, including Alistair Scott, who said:

‘[Bankers] aims changed from looking after their customers’ money to setting up hugely complicated and risky financial trading systems that would enable them to gamble with their customers’ money and generate vast bonuses for themselves.’

Rosamund Urwin from the Evening Standard even seemed surprised that such a high percentage of consumers still trust bankers, saying she’s ‘not sure what won over that 11%’, while TransferWise on Facebook suggested, ‘that 11% must be their mums’!

There’s no doubt that something needs to be done urgently if our faith in banks is to be restored. And now, in the wake of the Libor scandal, the government has commissioned a banking inquiry to make recommendations on how to fix banking culture.

Our Big Change campaign hopes to address some of these issues, but what could the banks do to regain your trust?

Comments
Member

Let’s work on a machine to replace bankers.

Earlier this year I made an investment of close to £50k with Lloyds. Their admin was atrocious and they didn’t bother to thank me.

A machine could be programmed to be efficient and say ‘Thank you’

Member

I might be a lone voice but I’m really happy with my bank. I have been with HSBC for almost 20 years – they haven’t always got it right, and I have occasionally been frustrated with telephone banking, but most of the time they get it right.

They were super when I had my purse stolen on holiday, they seemed supportive when I wanted to open an account for my child and were honest about not being the best in the market when I wanted to arrange a savings account.

Member

It’s great to hear you’ve had such positive experiences with your bank Sara. Some banks are really getting it right when it comes to customer service, but even so, I’m concerned about the bigger picture. Apart from customer service, banks have an enormous responsibility to their customers and understandably, consumers simply don’t trust banks to work in their interests. I think we’ll need to see some big changes in culture before banks start to earn our trust back.

Member
Sarah Chalmers says:
22 September 2012

I voted with my feet and changed banks. I certainly wouldn’t hesitate to do it again.

Member
par ailleurs says:
22 September 2012

Perhaps it’s time to call a few bluffs. The bonus/risk culture is always excused by the fact that if they didn’t go along with the demands of the higher levels in the sector then the bankers would all leave and set up shop elsewhere. There seems to be this strange idea that they and the similarly overpaid top captains of industry are the wealth creators for the country and without them we would all be worse off. So the rest of us are on no or low pay rises, fixed pensions and are saddled with mortgages that might never be repaid, have suffered a dramatic fall in our standard of living and are generally struggling along. Said top wealth creators on the other hand are still doing very nicely. Now I really don’t want to get into pure jealousy let alone venom and I’ve never even sympathised with the communist party but there are some remarks which just don’t seem to ring true.
Now if I could see bonuses abolished entirely that would be a start. Nobody ever suggested that my teacher’s salary should also come with an annual bonus. I did my job, was paid adequately and was happy with that.
I realise that the term ‘banking’ covers a wide range of activities but let’s have more along the lines of the Co-operative Bank where investment is (said to be) ethical. They also made it clear in the banking crisis precipitated by Northern Rock that they were not exposed to the same risks as the big players.
Finally, could we have some manners back? As John H said, they have large sums of our money on a regular basis. Are we thanked for our custom? No. We are given the impression that they are doing us a favour.
Dear oh dear. It’s Saturday evening and I’ve nothing better to do than moan but the world of banking has become rotten almost to the core. Is there a solution?

Member

It’s going to take a lot of work par ailleurs, but we think there’s some hope yet! We’ve just launched a new campaign for Big Change in the banks. The government has set up a commission to look into banking reforms and how we can improve banking culture, which we’re feeding into with our own suggestions. Read more and sign our pledge so we can show the government that consumers have had enough of banks’ bad behaviour: http://www.which.co.uk/campaigns/personal-finance/big-change/

Member
CityWatcher says:
23 September 2012

There are lots of things that need doing to fix the banking sector, but some big ones are:

(1) Separate retail and merchant banking from investment banking completely. Whilst Big Bang in 1986 made the City of London an exciting place for a while, it’s knock-on consequences went far further than most people involved in the making the change anticipated. IMHO, it is time to turn back time on many aspects of Big Bang. Separating retail and merchant banking from investment banking is number one on that list. I don’t just mean putting Chinese walls in place, as they don’t work. I mean real separation – different companies.
(2) Get rid of the system where losing money is not penalised, whilst making money is rewarded within the same year. That combination just results in ever-increasing risk-taking and short-termism.
(3) Banks should be owned by the people working in them, whether as co-operatives, partnerships etc. That way, if the bank loses money, the staff do too. That keeps the staff motivated to provide a stable, low-risk banking system.
(4) Once retail and investment banks are separated, let failing banks fail. Don’t keep them ticking over on taxpayer money. If they fail, they’re dust. That way, the bad banks go, the good banks survive.

For brevity, these bits are simplistic, but that’s the gist. Not all people involved in banking are bad, but very few people involved in banking deserve the packages that they receive. Many people in the City admit that when asked – they know that most people in the City do things that are far less important than others who are paid far, far less (whether nurses, fire & rescue etc).

Member
Ronald Stamper says:
24 September 2012

While participating in this discussion, Terry Arthur said:
“The banking industry is an arm of government.”
Famous bankers have said the opposite:
“Permit me to issue and control the money of a nation and I care not who makes it laws.”
Mayer Anselm Rothschild (1836-1905), banker
“I’m afraid that the ordinary citizen will not like to be told that banks can and do create money. And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hands the destiny of the people.”
Reginald McKenna (1863-1943), Chairman of the Midland Bank
“But if you want to be the slaves of the banks and pay the cost of your own slavery then let bankers continue.”
Sir Josiah Stamp (Dir. of the Bank of England 1928-1941).

We have allowed the banks to usurp the sovereign power to create our money supply, by fractional reserve banking. As a result, our money system is unstable; banks choose where to lend and only a tiny proportion goes to productive investments, far more goes on funding assent bubbles etc. For details visit the Positive Money website. Returning money creation to where it belongs, is entirely feasible, as this recent paper reveals:

IMF Research Dept. Working Paper: Chicago Plan Revisited by Jaromir Benes and Michael Kumhof August 2012 (The views are those of the authors, not necessarily those of the IMF or IMF policy.)
Abstract
At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan:
(1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money.
(2) Complete elimination of bank runs.
(3) Dramatic reduction of the (net) public debt.
(4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation.
We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher’s claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.

Member

It all comes down to a lack of mahogany – the sharp metallic towers of Docklands have had a bad influence on banking; they’ve given us sharp metallic people for whom trust is an alien concept. I think a lot of the bank staff we encounter in our everyday activities are decent, honest, trustworthy people doing a responsible job in a competent manner. Unfortuately, through their diligence and conscientiousness, they are having to compensate for the misdemeaours and defalcations of their brethren in the corporate HQ’s. I wouldn’t want a bank that didn’t make a profit but the corrosive effects of rampant greed and the cynical manipulation of wealth condoned at senior levels have now succeeded in undermining all respect for the profession of banking. The bad conduct has exposed banks to liquidity risks that did not previously exist and has cost the country dear. The consequences of this have been acutely felt by people trying to buy a house, develop their business, or retire at ease with their pension.

Member
Kristoffer Lawson says:
27 September 2012

I’m not sure if regulation is the right strategy. The recent crisis has helped push forwards a number of new startups who are aiming to severely impact the financial sector. Companies like Transferwise.com, who are cutting out the banks for foreign payments, Wonga who is offering new forms of credit, and then there’s also us, Holvi.com, aiming to completely change the type of services and the experience people have with banking. These are all building a new type of ecosystem around money and challenging the rather dusty norm of traditional banking.

Regulation is a very immediate, top-down solution, but given time pure innovation can also cause dinosaurs to stumble.

Member
Katie says:
20 February 2013

I read this with interest and would offer the following

Two types of trust

Institution based
Interaction based

Institutional trust is created and driven by the Government, yet seemingly we trust politicians less than banks – Hmm that could be a problem. Regulation is not the solution here – all it does is push cost up, create unneccesary work for people and make organisations bloated and slow. There’s already too much bureaucracy in many organisations – simplification is key here

Interaction based trust – this is you and I based on our experiences etc etc – In many industries, we can choose to pay for service – e.g Private Medicine, Private Banking, Apple computers over say Windows based PC’s.

Seems to me that the PPI “mis-selling” is a bandwagon that people have jumped on – around 1/3 of those that claim NEVER took the policy, and I know of a number of cases where the Insurance paid out the full agreement value and then the consumer still claimed they were mis-sold. LIBOR was not the high street bankers – SO DONT BLAME THEM.

Bankers bonuses are a fallacy – the guy on the street doesnt get a lot, and frankly they will get a lot less than sales people etc – Interesting if you claim now that Banks are primarily focusing on selling products to their customers.

Im also interested in the stats about the use of bank channel – my feeling is % wise that the majority of transactions are not Branch based…. I could be wrong though.

Stop bashing the High St banks and focus on the areas that are the problem