Report outlines bold banking reform proposals

Report wants massive culture change in the City
Report wants massive culture change in the City

By Alex Stevenson

A cultural revolution at the heart of the banking sector is among the proposals of Which?'s Future of Banking Commission's final report.

The commission, which includes former Treasury select committee chairman John McFall and ex-Tory leadership candidate David Davis, recommends sweeping reforms of the banking system in a bid to prevent a repeat of the disasters which triggered the 2008 global financial crisis.

Business secretary Vince Cable also contributed work to the commission before he took up his post in the government, adding further weight to its findings.

It supports the separation of retail and investment banking being investigated by the coalition government but goes further, seeking a separation of investment advice from the execution of trading.

'Living wills' for banks to prevent them being 'too big to fail', a new class of 'safe haven' accounts backed by funds invested in safe assets and regulation focused on ensuring banks can fail without significant harm to vital banking services are urged.

It is on the need for a culture change within the City where the report is most radical, however, as it seeks to break the approach to bonuses at a much more fundamental level than previously discussed.

"Bankers, like doctors, teachers and lawyers, should be trustworthy professionals motivated by the service which they and their institutions provide," the report recommends.

"This will require a new approach to defining the culture within financial organisations and ensuring that all levels of the organisation adhere to it."

A new form of professional standards training is envisaged similar to those seen in other professions.

The report concludes: "Our recommendations add up to a radical overhaul of the banking system, a programme that not only seeks to prevent the last crisis happening again, but which also addresses the systemic problems which have destroyed the trust between many banks and their customers and which have at the core the seeds of another, unforeseen catastrophe.

"It aims to create a banking industry of which its participants, and the society they serve, can be justifiably proud."

The commission was set up last December and has heard evidence from officials including Bank of England governor Mervyn King and the head of the Financial Services Authority, Adair Turner.


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