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Professionalism in banking; time for a race to the top

Professionalism in banking; time for a race to the top

Whether banking is a profession, is open to debate. Whether people working in banks can and should act professionally is, however, rather easier to agree on. We may differ on what constitutes a profession, but we know what ‘professional’ looks like when we see it (and even more so, when we don’t). In a sector such as banking, where customers – whether consumers, clients or counterparties – have of necessity to put some degree of trust in the behaviour and competence of those they are dealing with, we expect those providing the service to act professionally.

A steady drip-feed of examples of bad behaviour or lack of competence has undermined the reputation of the banking sector as a whole. Public confidence in the industry’s ability to manage and police itself has declined sharply, leaving a vacuum that regulation is now moving to fill.

Regulation cannot, however, do everything; nor should it aim to. Even the best designed, implemented and enforced regulation cannot guarantee that customers will be treated fairly or market participants act with honesty and integrity. It cannot transform poor managers or role models into good ones; and there are obvious downsides to a world in which a firm deems anything not explicitly prohibited, to be appropriate.

A strong, sustainable and competitive banking sector needs effective regulation and compliance; but it also needs something more. It needs firms – or more accurately, people within firms – who have their customers’ interests at heart, and who within this ethical framework have the ability, autonomy and confidence to exercise judgement when presented with situations that aren’t straightforward. It needs a culture in which knowledge and experience are valued, challenge and feedback are expected, and mistakes are recognised, remedied and learned from; a culture, in short, in which professionalism is the norm.

Such a culture is harder to build than one based on least-cost compliance with the letter of regulation. Professionalism is about much more than just the acquisition of qualifications; but if professional qualifications are not the whole answer, they can, in the right context, be a good place to start. Qualifications that are relevant, recognised and valued by employers can boost not only the competence of staff but also their confidence, influence and engagement. The attainment of qualifications can enhance mobility and diversity, and their application can encourage the continuous improvement and challenge that characterise a dynamic and competitive services sector.

Firms will not, of course, all use the same qualifications in the same way. The banking sector encompasses a variety of types of firm; banks and building societies, branches and subsidiaries, single site firms and multinationals, and many more. Firms differ in size, structure, markets, customers, history, technology, geography, ownership and strategy; and each firm will have its own culture and, relating to this, its own aspirations, challenges and

starting point. For some, the focus may be maintaining a longstanding culture and proudly earned reputation; for others, restoring or improving their reputation; and for others, on developing a cultural identity, adapting it as the firm grows, or unifying multiple internal cultures. While the use of qualifications and the qualifications used will vary, it is however important that, in a mobile – in parts, global – labour market, the qualifications on offer are recognised and (as appropriate) relevant across the industry. The professional development of the sector is the responsibility of the sector, and a responsibility shared by both the providers of professional qualifications and employers.

The Banking Standards Board, established to raise standards of competence and behaviour across the entire banking sector, will engage with both member firms and professional and industry bodies to examine how qualifications are currently used across the sector, whether and how this is changing in the light of the Senior Managers and Certification Regime and other developments, and whether it would change if the qualifications themselves were different. We will also explore the appetite among both firms and providers of qualifications for the type of professional association more readily found in e.g. medicine, engineering or accountancy being made available to staff in the banking sector, and what the benefits might be.

Acting on its findings, the BSB will encourage and challenge the industry in its efforts to build trustworthiness and demonstrate the sense of collective responsibility to society that has sometimes been described as defining a profession. This sense of responsibility is not about corporate social responsibility; it is, rather, to recognise that putting the interests of customers and clients at the centre of a bank or building society’s business, equates – given the sector’s inter-connectedness and its importance across the entire economy – to a core responsibility also to society.

This responsibility is already recognised and acted on by numerous individual banks and building societies, and by many of the hundreds of thousands of staff who work in the UK banking sector and bring professionalism to life every day. Translating it to the sector level is, however, no small task. It will not happen overnight, and it will not happen at all without concerted effort; but it is an effort worth making and one that no firm can affort to stand aside from.

Is banking a profession? The jury remains out; but we should not let its deliberations distract us from taking steps, now, to make professionalism a competitive advantage for the UK banking sector. Time for a race to the top; and one in which we all want and need as many winners as possible.

By Alison Cottrell, appeared in The Banker on 23 November 2015

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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