The Banking Standards Review Council has the potential to make a difference

June 12, 2014

–Tim Dolan is a Partner in the Financial Markets team in King & Wood Mallesons SJ Berwin’s London office. The opinions expressed are his own.–

With the Financial Services Authority (FSA) already replaced by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), what use does the UK have for another new financial sector body, the Banking Standards Review Council?

The Banking Standards Review Council (BSRC) will not be a regulator, providing day-to-day supervision of banks, it will review the progress that banks make in improving their culture, competence and customer outcomes, and report on that progress to the public annually.

The BSRC will review individual banks’ standards of good practice, such as whistle-blowing protocols, suggestions about appropriate retail sales incentives and processes for handling businesses in distress. It will focus on increasing the value placed on industry qualifications and encouraging good practice in learning, development and leadership, and it will meet with each participating bank’s non-executive directors on an annual basis to discuss their progress in meeting desired outcomes.

Although Sir Richard Lambert’s report was effectively commissioned by the UK’s seven largest lenders, it shouldn’t be viewed as a simple attempt by banks to avoid more direct intervention. Rather, it is an overdue initiative which should be supported by other industry participants and the regulators themselves.

While banks interact on a daily basis with their regulatory supervisors, with the exception of non-executive directors, there is limited opportunity for banks to genuinely benefit from an objective review of their operations from other experienced senior practitioners and representatives of customer groups. It will be a challenge to ensure that staff at banks can discuss matters in an open and confidential manner with the BSRC, but there will be a significant benefit to be gained from such discussions over time.

Although Andrew Tyrie MP and Chairman of the Treasury Select Committee reportedly welcomed Sir Richard’s appointment back in February with the words “you’ll be dead by the time anything changes”, the BSRC does have the potential to make a difference to banking standards over time – providing the opportunities it offers are recognised by the banking industry.

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