Time to discuss the future of banking

December 17, 2009

New Peter Vicary Smith– Peter Vicary-Smith is the chief executive of Which? The opinions expressed are his own. –

Since the financial crisis in October 2008, a number of reports have looked at the causes and consequences of the crisis and suggested possible solutions, but they’ve all been written from the perspective of bankers.

Ordinary people have been hit hardest by the recession and have been asked to bail out the crippled banks with their taxes but they haven’t been asked how they think banks can change for the better. Failing to ask banks’ customers – for we all have to use banks in one form or another – is missing a trick.

This is why Which? has joined with leading politicians and banking industry stakeholders to establish the Future of Banking Commission – to give ordinary people the chance to add their voice to the debate about how the banking system should be reformed so that we can avoid a repeat of the financial crisis.

As well asking for the views of ordinary people, we will be seeking evidence from a cross section of interest groups including the banking industry, academics, the Bank of England, the Financial Services Authority, Trades Unions and other consumer groups.

The commission will be looking to answer questions concerning the social function of banking, the impact on the public of the financial crisis, how to align the interests of consumers, banks, investors and other stakeholders and how to ensure greater competition in retail banking, among others.

This will take place over three Select Committee-style evidence sessions in early 2010 and will result in a report on the future of banking, which will be published early in the life of the next Government to influence its start up work.

Other members of the Future of Banking Commission include Philip Augar (formerly a Group Managing Director at Schroders’ and now a writer on the financial services industry), Clare Spottiswoode (former DG of OFGAS), David Pitt-Watson (Chair, Hermes Focus Asset Management) and Roger Bootle (Managing Director Capital Economics).

It seems ludicrous that past banking inquiries have ignored those who have been hit strongest by the banking crisis – the ordinary people and the wider interests of society. This is an opportunity to right that wrong. We believe that this Commission is needed to restore trust between the public and the banks.


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

If one accepts that the recent problems were caused by regulators who came from the wrong background, then “Which?” is merely repeating and compounding the same mistake.

After all, does not “Which?” and the Consumers’ Association believe that casual but recidivist criminals who repeatedly breach the terms of their contract with the bank and spend other customers’ money without authority should be allowed to continue to do so with impunity, without any penal charges being applied?

By all means have this debate, and in the terms described. But “Which?” absolutely has to recuse itself from the proceedings.

Posted by Ian Kemmish | Report as abusive

please let me know know how much the UK government is likely to lose once all the loans to the banks have been repaid and their investments in the banks have been finally cashed and how long is it estimated for the government to conclude the above ops? tku

Posted by peter fox | Report as abusive

The solution is simple,it is called the american constitution,of which is not followed anymore,so you get what we have here today,failed money system that only benefits a small group with no nations best interests in mind.It is what America was freed from in 1776,but now is subverted.Along with most of the world.
A worldwide gold and silver standard with the same value everywhere.This will eliminate alot of problems we face now.

Posted by Jeff | Report as abusive

Mummy, mummy, the bank traders shouldn’t have £100k bonuses.

It’s ok for footballers and singers but not bankers.

It doesn’t matter that the finance business produces 10-15% of the UK’s entire income.

It doesn’t matter that their methods relied on ‘securitising’ 125% mortgages, massive overdrafts and naff student loans.

It doesn’t matter that the share values of banks is a major component of out pension funds.

No, we’re still as stupid as we ever were.

Posted by Digger | Report as abusive

It`s oh so abundantly clear and simple.
Empower shareholders on renumeration for companies the same as unions have been asphyxiated by a vote for industrial action.
So every companies wage review should have 93.27% shareholder support.
Job done

Posted by barry bra | Report as abusive

We need to recognise that Banks are businesses, not public social institutions. As such they work to market forces and business ethics. Business does not realy have any ethics except to make money. Because of this, various types of business should are subject to legal restrictions, for example the licencing trade.

Bank customers need to be protected from unethical banking policies and the shareholders need protection from overly ambitious executives and market traders. For both of these groups it is often too late for them to do anything about the consequencies of poor banking management and irresponsible traders when things go wrong.

I suggest:
1) That all banks should be required to state a set of standards, a sort of short ‘bill of rights’ for customers that will be the basis for for all rules, terms and conditions that the bank issues as policies when dealing with its customers. Any rule or change that the bank institutes should be assesed against these core policies to ensure that they comply.

2) The law on lending needs to be changed to ensure that shareholders are not exposed to undue risk and that borrowers are not at risk of loosing their homes due to slight economic changes. I suggest that a cap be placed on the maximum mortgage ammount that can be secured against property of 80% and the maximum sum of all loans should not exceed 90% of property value. A bank should have to prove due dilligance in checking customers for outstanding loans.

3) Bankers bonuses should only be paid in shares to the full value. These shares should be prohibited from being sold, transferred or traded for 5 years.

4) Traders who show a loss in trading should be required to re-pay previous share bonuses within the 5 year period.

5) Traders who take undue risk with company money should be given written warnings and subsequently dismissed if they continue to exercise the same poor judgement. This should be assesses by an indipendent body.

6) Traders should be required to be certificated by the FSA after taking an examination which shopuld focus on ethics, trading standards and legal requirements. Just as doctors, pilots, ships officers etc are. If they act illegally or against a code of ethics then the FSA should withdraw the licence so they can no longer trade.

7)Banks should be required to remove ‘small print’ from contracts with customers. All contracts between banks and customers should be required to be in clear plain english. Where a bank does not follow this, then the courts should have the right to declare the contract unlawfull.

8)It should be illegal for a bank to provide an unauthorised overdraft facility (To make a charge for this, to charge for stopping payments or for issuing letters concerning the overdraft). Instead they should be required to contact the customer to agree on the overdraft amount and to clearly state the terms and interest rate before making any payment that would incurr an overdraft. There should be no other costs assosciated with an agreed overdraft other than the interest rate.

Posted by Bob Pemberton | Report as abusive

Banking is necessary to all of us, as individuals and as corporations etc; it is also required to keep financial systems, both micro and macro, operating. To react to these crises with measures that limit the ability of banks to provide the services consumers want, and services that corporations, both large and small, need, will serve neither consumers, institutions, nor the inustry. It can be summarised as a conflict between the capitalistic system we have become accustomed to (and fond of during bullish years) and an ‘adequate’ level of accountability. Banking is one of a number of areas that finds increasing friction between a capitalist idea contrasted with a growing desire for equality.
Capitalism promotes the zero-sum approach, which, by definition, needs to ascribe someones loss as a corollary to another’s gain.
In the current system, we need to find solutions that do not breach the free-marktet framework we are now all so accustomed to, but that hold sufficient oversight and accountability tools so that when the public interest is compromised (or in danger of compromise i.e. foreseeability), there is some recourse. On a macro level, this is decidedly difficult; as a result, those in control (of impending changes) must consider how to tackle such a complex issue, and insert safeguards against aggressive and unjustifiable risk-taking, against a need for growth, returns and capital protection.
The ‘Act Now, Think Later,’ syndrome has put us all in this position. The scope to behave in such a manner must be made open to retribution or punishment where a risk is taken against a greater interest. Compare, for example, the concept of negligence in most legal systems. Where a conduct creates a risk, and the negative outcome of the conduct can be foreseeably prevented by such foresight, engaging in that conduct in knowledge of the risk creates a) a duty of care, and b) a standard care. This is, in theory, designed to prevent reasonable (this word is gospel to tort and criminal law) people from acting in a manner that might cause danger or risk to others, regardless of the size of class of people being referred to. A similar duty ought to be imposed upon those in the banking industry, as a result of whose actions such a state of economic affairs could arise.
Much debate will centre around this in the Select Committee-like debates. But the need for restrictions of and penalties for abuse must be implemented. As for public bodies, or the RBS type public ownership-public control idea(s), a system not dissimilar to what we refer to as Judicial Review would provide increased confidence in the functions of such bodies, and restore faith in the idea that growth need not necessarily come from zero-sum initiatives, but rather mutually beneficial structres. Growth and profit and returns (all words cherished by the financial industry) may be diminished somewhat, but it seems that is a lesser evil than what seems to have transpired into reality over the past two years.

Posted by Rishi Ray | Report as abusive

Govt. will never do as it promised. Already they have begun watering-down their response, in-line with Gordon Brown’s familiar ‘light-touch’ policy as regards finance regulation: I refer to the tax on bonuses; suddenly it has become a ‘one-off’ tax – because of Brown’s connexions within the fanancial sector? I suspect that the fears expressed are really fears for reduced bank- profits from their gambling with our money. Finance, Brown and all his henchmen are determined to continue with minimum regulation as possible.

Posted by D.Thomas | Report as abusive

TOO EASY. TRY something more complicated . YOU have answered your own Question . BUT have not noticed . IT is YOU that is TRICKLINGLY MISSING the TRICK. AND BECAUSE you are missing the Trick it looks like the Future is ENDLESS SLAVERY and stupidity. However the GOOD news is you have pointed to the exact problem. IT is your conceptional assumption that is Wrong. The reason the problem can never be fixed is you REFUSE to critically investigate your own words. When you say “ – for we all have to use banks in one form or another – “ YOU are Wrong. IT is you that is Intellectually BANKING with a capital W. THE solution is to ween the Government and yourself into Adulthood. AND massively increase conceptional assumption called Human rights AS of RIGHT. To Daily bread and shelter decoupled from and with out recourse to the invisible hand of money lending table Banks. Gasph the economist Rickardo was Goodly into human rights. You clearly Prefer the phrase financial Crisis to the Older money lending tables crisis referenced to by the Good birthday boy at this time of year.

Posted by Eden and Apple | Report as abusive