Nearly a decade on from the financial crisis, subsequent reforms have put the UK at the forefront of banking standards. But there is no room for complacency, warns Anthony Browne of the British Bankers’ Association.
The UK’s position as a world leading financial centre has been built on a hard-won reputation for providing the highest standard of service to customers and clients. The financial crisis showed starkly, however, that these standards had slipped and needed to be raised urgently. As a result, the industry has been through a series of extensive reforms at a UK, EU and global level.
Almost a decade on, the industry stands in a far better position. Banks now hold seven times more capital to make sure the taxpayer never again has to bail out a failing institution. Changes to remuneration mean that risk is much more closely aligned with reward. The new Senior Managers Regime is helping to ensure that the UK sets the gold standard for accountability.
It is crucial, though, that we do not become complacent. Technological developments and changing consumer behaviour are transforming the industry. Banks, government and regulators therefore need to work together to deliver a financial system that delivers a first-class service to customers and businesses.
Driving up standards
Since the crisis, more than 80 pieces of legislation have been passed to make the financial system more stable and secure. Among the most significant reforms were the Senior Managers Regime and the Certification Regime, which came into force earlier in 2016. They ensure that ignorance can no longer be an excuse if failure or misconduct falls inside a senior manager’s area of responsibility. Senior bankers have a statutory duty to prove they took reasonable steps to prevent a problem.
These new rules come on the back of the Fair and Effective Markets Review in 2015, which sought to address the root causes behind misconduct in wholesale markets that has taken place in recent years. The reforms the review proposed will help to ensure markets operate for the good of society, rather than the personal gain of traders.
Efforts to raise standards have not just been driven externally. The industry has become much more customer focused. Sales commissions are outlawed for frontline staff, who are no longer given bonuses on the amount they sell but rather for having high levels of customer satisfaction. The industry also came together to form the new Banking Standards Board to ensure high professional and ethical standards in banks.
Combating financial crime
Financial crime is one of the most significant and complex threats facing the public and banks. Criminals are increasingly devising ways to scam banks and their customers or to launder the proceeds of crime, utilising new technology. Bank customers are a target now more than ever before; recent figures show that customers lost more than £755m ($1.08bn) in 2015 – a rise of 26% on the previous year. Institutions are also victims of scams as the recent attacks on banks using the global messaging service Swift demonstrate.
To combat financial crime, banks are already making significant investments – more than £5bn per year – into compliance, and identifying and preventing illicit flows of finance. But currently the collective investment across the public and private sector delivers less than the sum of its parts. That needs to change and a more strategic, intelligence-led approach that supports financial institutions to manage and mitigate risks is required. Better communication and engagement between banks, regulators and law enforcement, supported by the right legislation to allow data sharing, will create a stronger intelligence picture and help transform the approach to financial crime.
The Joint Money Laundering Intelligence Taskforce (JMLIT) is a good example of how strategic partnerships can produce a cohesive and thorough response to emerging threats. Set up just last year, JMLIT pulls together intelligence from law enforcement and more than 20 major UK and international banks. In order to combat financial crime more effectively – and without introducing unnecessary burdens – this type of cross-cutting partnership work and intelligence sharing is vital.
Anthony Browne is chief executive of the British Bankers’ Association.
