Could this report change the banking sector forever?

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“Banks exist to serve the economy”. This is one of the guiding tenets of a new report “Banking on Trust” from BankingFutures, led by Meteos, a not-for-profit research group, and Leader’s Quest, a social enterprise helping business leaders change the culture of their organisations. It might sound obvious, but the job banks have done recently would call into question whether self service has been more the order of the day.

“We recognise that the financial crisis of 2007/08 – in which the banking sector played a pivotal role, was at the expense of social value”, the reports authors state tactfully, as they lay out their mission to identify what needs to happen to avoid a repeat crisis.

The key findings are:

  1. Banks to better serve the real economy’s current and future needs.
  2. Bank leaders commit to work with the Investor Forum to create banking and investment cultures that enable the sector to deliver long-term value.
  3. Bank leaders commit to a public process involving consumers, civil society and regulators to improve their duty of care and respect for customers.

Those are our italics.

Real means the economy that produces actual things, rather than just more money.

Long-term value means a way from the short-term profit motivation – the result of being held accountable only to shareholders, who typically want the maximum returns over the shortest possible time period, rather than all stakeholders, which would include customers and society too (this is what the B corp initiative is trying to address).

And duty of care is an interesting one. A drive, perhaps, towards treating customers like people rather than milking them like cash cows in the form of exorbitant overdraft charges, mis-sold PPI or excessive credit limits, for example?

The contributions to this report are high level. Andrew Bailey, the newly appointed chief executive of the Financial Conduct Authority and former deputy governor of the Bank of England, is quoted in the intro: “The financial crisis was a painful reminder that commercial banks should operate for the good of the public, their customers. Now we must tackle the question of what banking system we do want. BankingFutures is an important initiative involving a wide group of stakeholders. It has a call to leadership, to respect customers and to support our economy. The report is an important start but it must not gather dust. Now we must all make the change happen”.

The working group comprises a number of key personnel from M&G Investments, HSBC, Schroders, UBS, Barclays and Santander, among others.

The BankingFutures group drew the following conclusions from very wide-ranging discussions with all stakeholders – including customers:

“People need to feel confident that banks will respect the privileged access they have to government and policy- makers, will work with regulators, not against them, put the customer’s – and not the bank’s – interest first, and that they will reward themselves appropriately.”

“(There was a) consensus that if bank, investor and societal incentives were better aligned to meet each other’s needs and expectations, the system would be more balanced and thus would require much less regulatory intervention.”

You can read the full report here.

How do you imagine an ideal bank would act? We’ve got some ideas for starters here.

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Rebecca O'Connor

Rebecca O'Connor, a financial journalist, is co-founder and director of Good With Money. Formerly a staff writer at The Times, she covered personal finance and business for eight years before going on to spend three years as communications director at Trillion Fund, a renewable energy crowdfunding platform. Rebecca writes about personal finance regularly for The Times and The Spectator and has written articles for The Observer, The Guardian, Huffington Post, The Ecologist, Moneysupermarket.com, Energydesk, Moneywise, BusinessGreen and Ethical Consumer.