BBA publishes options paper on banking standards1
15/01/2013

Following BBA Chief Executive Anthony Browne's appearance before the Parliamentary Commission on Banking Standards (PCBS) yesterday afternoon, the BBA publishes its submission to the PCBS which sets out a range of possible options to improve standards of banking practice. The submission also includes industry proposals to rejuvenate the oversight and enforcement mechanisms to clamp down on rogue bankers and bad practice.

The BBA’s formal submission to the PCBS sets out different options and a balanced view of the pros and cons of each.  It floats the idea of a new Banking Standards Review Council (BSRC), an idea which has been developed in a report by KPMG for a BBA taskforce of twelve BBA members including three European banks and one American bank.  The idea has also been discussed with the Chairmen of the six main UK banks (Barclays, HSBC, Lloyds, RBS, Santander and Standard Chartered).

There are three main strands to the BBA’s submission:

First, strengthen the existing regime. Work needs to be done with the new regulator, the FCA, about their intentions to toughen up standards, including the use of the Approved Persons Regime. The paper proposes that any gaps in the current regime could be closed – i.e. all roles with significant responsibility for risk or customer facing activity should be covered.  We suggest that the regime could be expanded to cover all people involved in customer-facing activity and significant wholesale market transactions or dealing.

Second, enhance professionalism – by increasing the independent oversight of professionalism and training, or by the FCA taking the lead on producing guidance or setting standards. This could include the creation of a Professional Standards Board. This is described this as a ‘bottom up’ approach.

Third, a more ‘top down’ approach with a new Code of Conduct applied universally across all bank employees that sets out ethical principles to which they would be expected to adhere. Responsibility for the oversight and monitoring of the Code could sit with the FCA; or if the PCBS and Government think it is the right approach, the industry would support the establishment of a ‘Banking Standards Review Council’ (BSRC). The BSRC would be responsible for ensuring that banks and their employees adhere to the Code. The Code would need to cover expectations on company boards, senior management, controls, systems and remuneration structures.  Another option is that a blacklist of employees be developed with the aim of preventing individuals from working in either banking or the wider financial services sector. The BSRC would need to be independent of the BBA and the industry, with an independent chair and a majority of independent non-executive directors.