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Blog series – Chris Megone

Do I trust my bank? Well, I have been a customer/client of X Bank for more than forty years. I suppose that reflects a level of trust in an organisation, even though my trust in banks and building societies has not been unaffected by the crisis of 2008/9.

Notice – the question was about my attitude to my bank, but this response mentions my attitude to banks and building societies as a group. Actually there are three questions here: ‘do I trust my bank/building society?’; ‘do I trust the bank/building society sector?’; and, ‘do I trust individual bank employees?’. I shall suggest that these issues are subtly connected.

Let me begin with a story. When I came to Yorkshire in 1983 I joined a cricket club. In that club was a good fast bowler. Bill was a competitive cricketer but a man of good demeanour, reliable, honest, well-grounded, a good judge of people and situations. He was not a saint (can any fast bowler be a saint?), but in human terms a person of virtuous character. And, as it transpired, Bill was the local manager of my bank.

Bill was what I expected of a bank manager – a trustworthy individual. But he also confirmed my view, and expectation, of all bank managers. I did not think it was because he worked for X bank rather than Y bank that he was trustworthy. I expected the class of bank managers (and other bank employees) to be trustworthy. And I expected that he, as a bank manager, would help to spread trustworthy behaviour across the organisation and that the organisation would support him in both remaining trustworthy himself and helping his employees to be trustworthy.

I had these expectations of bank managers in general, even though the banks and building societies which employ them are in competition with one another. In other areas of professional life, accountancy and the law, for example, firms compete for business, but there are certain key features of character which are expected of every member of the profession, and trustworthiness is one of them.

Used to thinking competitively, banks and building societies have responded to the financial crisis to some extent as individual organisations. What is important to them is that their organisation is trusted. Distinct banks and building societies each proudly display their own distinctive values, often seen as part of a competitive brand.

But trustworthiness is something that banks and building societies need to address collectively. As one of our interviewees, a senior member of a very large bank, put it: ‘[it is important to recognise] that a good ethical and cultural baseline is not necessarily a competitive advantage at all. It’s a good thing for the industry to have’.

My own experience also suggests that if customers do have trust it is typically at once more general and more specific than trust in a particular organisation. Customers trust an organisation’s employees, particularly those whom they know personally, or they trust the industry in general. People understand that organisations compete with each other, but they expect the industry as a whole to be trustworthy, and if one organisation, or some individuals, turn out not to be trustworthy, this affects how much they trust the whole industry.

Why is it that PwC can compete with KPMG, Freshfields Bruckhaus Deringer with Linklaters, but it is crucial for every accountant and lawyer, (and every doctor and teacher), to be trustworthy? This is because in all these professional fields there are common fiduciary purposes, with respect to the client’s finances, legal needs, health and education, which make a common baseline of

trustworthiness required. And it seems clear that banking has a common fiduciary purpose with respect to client finances which makes trustworthiness necessary as a common standard here too.

And as the etymology of the word ‘member’ (membrum) makes clear, individual professionals are the limbs of a professional body, or of a firm, and thus their trustworthiness affects, and is affected by, the trustworthiness of the wider body (the other members). Or, as Aristotle put it, we are gregarious beings, so with respect to trust we flourish or fall, as individuals and groups/firms, together.

One way to pursue a collective response is to regulate. But trust depends on the character of individual bankers, and whilst regulation may affect character development it is certainly not sufficient to produce good character. First, those who simply rely on regulation remain at a very early stage of character development, obeying rules without knowing why. And second, character is shaped by more than regulation, notably by the culture of the firm and professional body to which the individual belongs.

Chris Megone, Professor of Inter-Disciplinary Applied Ethics, University of Leeds

 

Senior Managers and Certification Regime

Exploring how the SMCR - and especially Certification - can be implemented in the most effective way across the sector.

The Senior Managers and Certification Regime is a major regulatory change that will affect all banks and building societies. Responding to recommendations by the Parliamentary Commission on Banking Standards, the government and regulators have together developed a comprehensive framework to ensure better accountability and responsibility for behaviour, competence and culture in banks and building societies. The new framework provides an opportunity for the industry to focus on and demonstrate a culture of professionalism. We are working with firms and regulators to facilitate this, including areas where a common approach across firms could support both the objectives of the regime and the skills and development of the people covered by it.

Professionalism

Evaluating whether a more 'professional' approach to banking would improve behaviour and competence across the industry.

The Parliamentary Commission on Banking Standards found that 'banking culture has all too often been characterised by an absence of any sense of collective responsibility to uphold the reputation of the industry', and argued that a greater focus on professionalism could be an answer to this. Working with a leading team at the University of Leeds, we are researching the issues around professionalism in banking. In particular, we are reviewing how professional qualifications are currently used across the sector, and at whether a stronger role for professional bodies, along the lines seen in some other sectors, like medicine or law, would help raise standards. To inform this work and develop a rounded picture of 'professionalism' and what it means in banking, we are surveying banks and building societies, professional bodies and a wide range of other interested groups, including consumer bodies and investors.

Assessments

Providing an honest and impartial assessment to Boards of progress against objectives on behaviour, competence and culture.

The BSB assessment exercise presents Boards with an objective and impartial view of their firm's culture, identifying where things are working well and recommending areas for improvement. It draws on information not only from Boards and senior teams, but also from employees, investors (or members), trade unions, customer groups and other relevant bodies. In doing so, it will provide constructive challenge to each firm individually, while building a collective understanding of common issues across the industry, or sectors within it. We undertook our first annual assessment exercise in 2015 with ten firms (Barclays, Citi, HSBC Bank, Lloyds Banking Group, Metro Bank, Morgan Stanley International, Nationwide, RBS, Santander UK and Standard Chartered). The BSB itself will not publish individual assessment reports - each firm owns its own report - but key themes and messages will be set out in the BSB's annual report, the first of which will be published in Spring 2016. Given that Board engagement is central to the assessment work, only firms that have their headquarters in the UK are eligible for the full assessment exercise. All firms, including branches of firms headquartered overseas, will however be included in a focused membership-wide survey, which will allow each participating firm to benchmark itself against its peer group.

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HAS YOUR BANK FAILED TO RESPOND ADEQUATELY TO A COMPLAINT?

If your bank/building society has not responded adequately, or in time, to a complaint that you have already made, you can register your complaint with the Financial Ombudsman Service. Which offers a guide on consumer rights when taking a complaint to the Financial Ombudsman Service.

ARE YOU SEEKING GUIDANCE ON YOUR FINANCIAL AFFAIRS?

If you have a problem or query relating to your financial affairs, or are seeking personal finance advice or guidance, there is free, impartial information available from the following organisations:

ARE YOU CONCERNED ABOUT ACTIVITIES CONDUCTED IN YOUR INDUSTRY?

If you work in the financial services industry and are concerned about any activities conducted by your employer or any other firm or individual, you may find the Financial Conduct Authority and the Prudential Regulation Authority's guidelines on whistleblowing helpful. It explains what constitutes whistleblowing, and what procedures are in place to respond to blow the whistle and how your anonymity would be protected. Public Concern at Work, the whistleblowing charity, also offers support and advice to individuals and employers about how to report concerns and how to establish whistleblowing frameworks.

ARE YOU SEEKING AN INDEPENDENT FINANCIAL ADVISER?

If you are seeking the services of an independent financial adviser, Unbiased may be able to help, or if you are looking for more general financial guidance, the Money Advice Service may be a useful place to start.