Banking Future: Where next for the banking sector?
The financial crisis has left the public’s trust in the banking system at an all time low and while the banks have spent the two years rebuilding their battered balance sheets, we believe there’s now an opportunity for them to rebuild relationships with their customers too.
This is why Which? joined forces with Rt Hon David Davis MP, Rt Hon John McFall MP and Dr Vince Cable MP, to form The Future of Banking Commission, which launched its recommendations in June 2010. Unlike other enquiries into the financial crisis, the Commission was a unique opportunity for the public to have their say in how the banks could better meet their needs.
The Commissioners were all united in wanting a banking system that is secure, profitable and that properly fulfils its crucial role in society. To achieve this, major reforms are needed to the structure, regulation, governance and culture of the industry.
First and foremost, banks must be structured so that they can fail without the catastrophic consequences to their customers and the wider economy that we have seen. We believe that a key to achieving this would be the creation of ‘living wills’, detailing how the collapse of a bank would be managed.
What’s more, a new class of ‘Safe haven’ accounts should be established with a 100% guarantee, but which would only be invested in safe assets and would therefore have a lower return.
The separation of retail and ‘casino’ banking has the potential to solve many of the problems caused by large, integrated banks and is something the government’s new commission should urgently consider.
To tackle mis-selling and the sales-based culture disliked by customers and branch staff alike, banks should cease paying sales commission to frontline staff. Instead staff should receive bonuses linked to levels of customer satisfaction, the fair treatment of consumers, and resolution of complaints.
Our recommendations add up to a radical overhaul of the banking system, a programme that not only seeks to prevent the last crisis from happening again, but which also addresses the systemic problems which have destroyed the trust between many banks and their customers. It aims to create a profitable, secure banking industry of which its participants, and the society they serve, can be justifiably proud.
Video: Peter Vicary-Smith on the state of UK bankingTagged in: banking future, banks, finance
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