A recent consultation paper published by the Banking Standards Review has recommended that a new independent organisation should be established to oversee the business activities of British bankers and it should be led by people from outside the industry to establish its independence and credibility.

The Banking Standards Review consultation paper is the start of a process that is intended to encourage better banking in the UK.  The review was launched at the request of the chairmen of HSBC, Barclays, Standard Chartered, RBS, Santander, Lloyds and Nationwide, and is presided over by Sir Richard Lambert former director general of the Confederation of British Industry.

The goal of the review is to create a new independent body which is to be funded by the banks themselves.  The first task of the new body will be to define standards of good conduct, and to help drive these into all business activities of the UK banks.

The consultation paper strongly recommends that the credibility of the new body should be built on the independence of its board, and on widespread industry participation.  The paper advises that non-bankers should be appointed as chairman and chief executive of the organisation and most of its board should come from outside the banking industry.

The new body will aim to work closely with regulators to maintain a certain level of conduct and it is hoped that its existence will help raise banking standards and conduct.  Under the proposals of the consultation paper, banks would also have to report each year on their behaviour and competence, a requirement which aims to rebuild consumer trust in the banking sector

The consultation paper also suggests that banks should commit themselves to a programme of continuous improvement in their standards of behaviour.  They will be asked to show how far their code of conduct is incorporated in the daily operations of their business, and the extent to which it is understood and followed by their employees.  They will report on issues such as whistle blowing, diversity and discipline, and on the progress employees are making in terms of training and development.

It is hoped that responses to the consultation paper, published in February, will help shape the final recommendations of the review which will be published at the end of March.

Scott Connarty