SpecialSpecial report report CHARTERED Spring 2013 BANKER The magazine for financial professionals Beyond the blame game LEADERS SEEK THE POSITIVES “This won’T “We’re noT “IT SHOULD “AS LONG AS “You become HAPPEN CREATING A NEVER HAVE IT’s bankers’ A LEPER, A OVERNIGHT” PAPER Tiger” happened” blood” Pariah” P3 p7 p11 p12 p15 Beyond the Blame Game 1 Special report CHALLENGES & SOLUTIONS 3 Pioneers in banking Banking leaders are “moving decisively” to raise the professional standards of thousands more individuals. professionalism The Chartered Banker Institute leads the industry’s LONDON SAYS: effort to enhance its standards and culture, argues “COUNT US OUT” 6 Chief Executive SIMON THOMPSON – and he London excludes itself from Europe’s “historic” welcomes the evidence that so many others are now banking union. following that pioneering trail. or years, this Institute has campaigned for regulators and ELECTRIFY THE policy-makers to focus on issues of professional culture RETAIL RING-FENCE 7 and standards in banking every bit as keenly as they must also address key operational behaviours governing capital Ministers must toughen their Fadequacy and lending criteria. reforms of banking regulation At the Chartered Banker Institute we’re therefore delighted and supervision, says the that the sector is now moving so decisively towards that goal Parliamentary Commission. and looks set to build on much of the Institute’s pioneering work. As the only remaining Institute of Bankers in the UK, we’re leading the industry’s effort to enhance standards and culture through embedding a Code of Professional Conduct, FROM LIGHT TOUCH developing professional standards and enhancing banking qualifications. TO HARD FIST 9 After several set-piece inquiries – Cruickshank, Turner, Walker, Vickers, Wheatley As Ministers reshape financial and now Tyrie – Ministers are now urgently implementing plans to beef up their regulation, there’s an early pivotal Financial Services (Banking Reform) Bill. In this Special Report, we examine the trail of victims and victors background and the new personalities who are taking charge of the UK’s reformed among the watchdogs. regulatory machinery. Our central purpose here is to discuss the key challenges we all face – and our positive proposals for meeting them – as the sector now RISING COST OF “Independent research TWO SCANDALS 11 reaches Beyond the Blame Game that has consumed the shows that bank customers Swift reform is vital to restore energies of two governments overwhelmingly value confidence after the LIBOR to create robust new regulatory rig, while PPI mis-selling risks machinery in the wake of the and trust the Chartered becoming a runaway liability. 2008 banking crisis. Banker qualification – the This is no more than is desired and expected by Gold Standard.” UNCLE SAM’S banking’s own customers. LONG ARM 12 Over months and years, independent market research has shown that bank customers overwhelmingly value and trust the Chartered Banker qualification – the Gold Standard. How that “special Individuals and businesses alike are consistent in saying that they’d prefer: relationship” has been affected by the global • to work with a Relationship Manager who is a professionally-qualified Chartered Banker economic turmoil. • to bank with an institution in which all appropriate staff had passed their banking exams. And recognition of these pronounced customer expectations is precisely one of the THE TALE OF THE 15 reasons why more and more people working in banking, both in the UK and increasingly WHISTLEBLOWER in the world’s financial growth centres, are now seeking to enhance their qualifications, Will they get the support professional status and career advancement with the Chartered Banker Institute. they deserve from the lawmakers? Beyond the Blame Game 2 CHALLENGES AHEAD While media and politicians still focus on retribution Special report for the 2008 financial crisis, SIMON THOMPSON finds that banking leaders are moving decisively – led by the Institute – to enhance and extend professional standards to tens of thousands of individuals. A harvest of challenges &solutions 3 Beyond the Blame Game s Parliament completes Approved Persons Regime to cover more an extension of the Approved Persons its banking regulation individuals working in key retail and Regime.” reforms and MPs prepare wholesale banking roles. And he seeks a Meanwhile, the Institute’s view is their “Phase Two” design of corresponding extension of the current that the boards and senior management new machinery to embed scheme under which the UK’s eight FSA- of banks should themselves have a higher standards of Accredited Bodies, including the Institute, duty to promote a positive culture of Aprofessionalism in financial services, the are mandated to ensure individuals professionalism in their institutions, and banking industry itself has an important in certain roles hold a Statement of produce evidence that this is the case. duty to help move the debate beyond the Professional Standing. “Raising standards in banking current intensive “blame game”. It should be possible to achieve this requires both individual and institutional That’s the conviction of SIMON enhancement relatively quickly, he says, engagement – an individual’s behaviours THOMPSON, Chief Executive of the because the mechanisms are already at work are driven both by their own Chartered Banker Institute. In a in place. “The greatest advantage in moral principles and the policies and memorandum to the Parliamentary adopting this approach comes, in my norms of their workplace.” Commission on Banking Standards, he view, from the fact that we have in examines how policy-makers, regulators banking a strong, independent regulator. INDUSTRY-LED INITIATIVE and the industry might enhance existing “The Financial Services Authority – and The Chartered Banker Professional frameworks and mechanisms for setting, its successor Financial Conduct Authority Standards Board (CB:PSB), established implementing and enforcing professional (FCA) – is well staffed, well resourced and in October 2011 by nine leading UK standards in banking. already operates a strong and intrusive banks and the Institute, has already He identifies two key challenges for monitoring regime.” implemented an industry-led approach to the industry: raising ethical and professional standards • First, how best to extend the reach in banking. The Board’s Customer of regulators to encompass the If we succeed Advisory Panel provides significant thousands of people in banking not in raising external input which is currently being currently covered by any requirement extended. The initiative has involved: to meet agreed professional standards. standards of individual, • Devising a Code of Conduct, • Second, how to sharpen our focus on institutional and subscribed to by banks accounting the professionalism of individuals industry behaviour, for some 75 per cent of UK banking in banking, where at present it is employees. The nine member banks primarily concerned with the conduct then our customers, have adopted or aligned existing of firms. and society more codes with the CB:PSB Code, and have widely, may bestow established systems for identifying and FOCUS ON STANDARDS dealing with breaches of the code. Thompson distinguishes between trust upon us.” • Developing detailed professional the industry’s twin aims of raising standards, setting out the knowledge, professional standards and restoring skills, values, attitudes and public trust. He says he doubts whether TWO KEY CHALLENGES behaviours required for an individual it’s possible to achieve both objectives Thompson foresees two potential to implement the code. “Seventy simultaneously just by extending or difficulties in extending the Approved thousand individuals will meet the strengthening the existing Approved Persons Regime. The first is identifying Foundation Standard for Professional Persons Regime under which the Financial which additional key roles in banking Bankers by July this year, with many Services Authority deems individuals to should be included – and which excluded. more to follow by year end.” be “fit and proper” to perform statutorily The current regime covers some • Aligning banks’ learning & defined controlled functions. 150,000 individuals in financial services, development, performance “I think these two aims must be about 37,000 of them in banking. “It’s management and internal monitoring solutions separated,” he says, “with policy-makers, hard to see this being extended to cover systems to support implementation of regulators and the industry focusing the majority of the roughly 450,000 the code and professional standards. on raising professional standards. If individuals employed in banking in the • Creating systems to monitor and we succeed in raising standards of UK, which would still leave large numbers oversee implementation of the individual, institutional and industry not covered by a new professional code and standards, including self- behaviour, then our customers and standards regime.” assessment, critical evaluation and society more widely may bestow The second challenge concerns the external assurance. trust upon us – but I am not sure that fact that the FSA (and its FCA successor) any reforms we propose or make will is primarily a regulator of firms, THE WAY FORWARD restore trust directly, nor will this rather than individuals. “Regulating Meanwhile, the CB:PSB has prepared happen overnight.” individuals requires a different approach plans for