The country’s biggest lenders have agreed to set up a new body to improve standards and the reputation of the banking industry.
Barclays, HSBC, Lloyds Banking Group, RBS, Standard Chartered, and building society Nationwide have set up a Banking Standards Review Council, following recommendations by former CBI chief executive Sir Richard Lambert.
Sir Richard said the body, to be launched later this year, will seek to improve the culture, competence and customer service of banks. Lenders who sign up to the body must report once a year on their progress.
The new body marks an attempt by the banking sector to repair its tarnished image following a series of scandals, including Libor rate rigging, mis-selling of payment protection insurance and breaches of anti-money laundering rules.
The body will cost between £7m and £10m a year and will be funded by the banking industry. However, in a move to ensure independence, the Governor of the Bank of England, Mark Carney, will chair a panel to pick the chairman of the Banking Standards Review Council and ratify the appointment of its chief executive.
Mr Carney said: “I encourage all banks that operate in the UK, both domestic and foreign, to support this endeavour. We need a financial system that is safe, fair and acts with integrity.”
Sir Richard - a former editor of the Financial Times and an ex-member of the Bank of England’s rate-setting Monetary Policy Committee - was asked by the country’s six biggest lenders to come up with proposals for the new body last September.
He will also take up the post of interim chairman, until a permanent chairman is appointed later this year.
Sir Richard said: “Rebuilding confidence and trust in the banks is especially vital in the UK, because of the size of the banking system and the importance to the economy of London’s role as an international capital market.”
The new body will set standards of good practice that may include whistleblowing protocols, processes for handling small businesses in distress, dealing with conflicts of interest in the capital markets and managing high-frequency trading. However, the body will not have statutory powers. Sir Richard said it will only have the power to name and shame offenders “through the power of disclosure”.