The change at the helm of Barclays has brought the subject of banks to the fore again. My take on what is needed to rebuild public trust and a sustainable banking model:-
Seven ways to banking people trust
1. End free banking
Its no excuse for poor sales practise, but it has contributed to pressure to cross sell unsuitable products to the wrong customers. Free banking is a mirage, banking costs money and a more transparent approach is needed. Free utility banking is loss making.
2. Make Bank Charges proportionate
For many young people the first tangible experience of banking can be triggering off a raft of penalty charges. Better financial education is needed and banks could do more as part of the new account opening process. A money management ‘teach in’ would save pain for both parties in the long term. Save penalties for serial offenders
3. Make all core/non core risk products subject to eligibility checks
Many of the products which have caused difficulty work well for the right customers. Customer need and claims eligibility should be key drivers. Large numbers of bogus PPI claims will be made as a result of official pressure to pay up.
4. Change remuneration back to traditional methods
Traditional methods evolved over hundreds of years for good reasons. Pay a reasonable salary for doing the job well, any bonuses could be in the form of long term deferred incentives vesting after significant periods such as 10 years or at retirement. Any serious misconduct should see a withdrawal of benefits and customer restitution.
5. Introduce a universal banking code of conduct
A binding code of conduct with financial penalties applied for deliberate non adherence. Treat customers fairly, manage and declare conflicts of interest. The public need to believe banks mean my word is my bond.
6. Introduction of fair tax policies
Board committees are routinely formed for audit, risk, and remuneration, why not CSR including tax. Tax is one of the important contributions an organisation makes to wider society, beyond its economic, wealth creation and employment benefits. Corporate social responsibility could be expanded to include fair tax policies. Tax planning is a policy matter and should extend beyond the remit of the Finance Director.
7. Manage the bank for all stakeholders
Customer value, shareholder value and staff interests need to be balanced. Barriers to entry in banking exist to protect the public but should not be used to create disproportionate value for executives. Entrepreneurs by and large risk their own capital, investment banking traders by and large do not. Rewards should reflect these differences.
We all need a functioning healthy and profitable banking system, capable of delivering value for money services, keeping our cash safe and moving our money around.
Britain has few large world class industries, banking is one of them.
Public confidence can and must be rebuilt.