The chairmen of the five largest UK-headquartered banks reflect on how the retail banking landscape may evolve by 2020 and discuss a number of the most compelling issues facing the industry in the interim: ethical standards, regulation, excessive pay and bonuses and restoring public trust. Chiara Francavilla reports
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Only 28% of people think you can trust UK high street banks, according to YouGov with a mere 11% of the view that banks are showing they are a benefit to the economy and society (Populous).
So it seems entirely appropriate for the British Bankers Association to choose as the theme for its annual conference "Restoring Trust" because it is the biggest challenge facing the industry.
The chairmen of five main UK banks discuss a number of the major issues that they need to address:
Q: Would you support the introduction of a Banking Standards Board?
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By GlobalDataDavid Walker, Barclays: "There is a strong case for a standards board. The tricky part of the process is to define what kind of failure is so egregious to effectively make someone practically ineligible for employment, like the General Medical Council, the Law Society or the accountancy professional bodies do."
John Peace, Standard Chartered: "This is a route worth exploring, but it’s important not to create a huge bureaucracy if it’s going to have no teeth and no purpose. We need not to put the City of London at a competitive disadvantage. We need to make sure that whatever action we take, we shape it taking into account the issue of trust and integrity, but also London being a place to do business."
Win Bischoff, Lloyds Banking Group: "A standards board is something many of us would be behind. But the public will only think it works when there’s a tangible example of either someone being denied work or being sanctioned."
Q:What is your take on the issue of senior bankers’ pay?
Philip Hampton, RBS: "In some part of the baking sector the pay has just been grotesque. It went completely out of line with pay in other sectors, and more importantly, it went completely out of line with returns for shareholders. That alliance needs to get better shaped."
Douglas Flint, HSBC: "There were examples where people rewards were unrelated to performance, and that was utterly wrong. People were able to be paid in advance, without the ability to adjust when things went differently. But I think that aspect has been addressed."
Q:What concrete measures have you taken to restore public trust in the banking industry?
Win Bischoff, Lloyds Banking Group: "Lending is very important. We have engaged in activities to help people presenting the case for lending if they think they should have it. The government is helping, in relation to Funding for Leading Schemes. It’s really helpful for some banks that may not have the establishment to pass on low rates of lending to their borrowers."
Philip Hampton RBS: "We approve 85% of the SMEs’ applications that we receive, but obviously the 15% we don’t approve is many thousands of people. I think banks have an awful lot to do to improve their services to customers, but what also matters is to improve their performance to shareholders. That’s the double challenge here."
Douglas Flint, HSBC: "One of the big tests for all us was realising that people came to banks for equity financing, not debt. So we put up some £50m to help SMEs to get the financing for equity that we could give them, so that they could leverage on that and grow their businesses again. This is a really important success story."
David Walker, Barclays: "We all know what we need to be doing, but the execution takes more time. We in Barclays are active supporters of the Funding for Lending Scheme, which we have devised as to give an upfront cashback to businesses. But what concerns me the most is something out of control, which is the lack of demand."
Q:What do you think of the new regulations that are currently being discussed?
Douglas Flint, HSBC: "An enormous amount of good work has been done by policy makers and regulators on the industry, but nothing is really finished yet. So whether is Dodd-Frank, Volcker, Basel III… nothing has been finalised on both sides of the debate. There is an urgent need to settle the framework of the latest regulations, and implement them."
David Walker, Barclays: "A very important objective is that we want to reduce the relative significance of banks. In Europe, we should move away from a situation where 70% of funding for corporate services comes from the banking system, to shift to something closer to the American system, where 70% of funding comes from capital markets. I think that a 50-50 split would be an objective."
John Peace, Standard Chartered: "From a regulatory point of view, from a central bank point of view, from a governmental and policy point of view, a lot has been done to put in place a new framework to do business. Give it the chance to settle. See how it works. The bigger problem we may have is that we could introduce new risks if we keep bringing in more and more change."
Q:In brief, will the financial services industry be bigger or smaller in 2020?
Win Bischoff, Lloyds Banking Group: "It will be bigger in absolute terms, hopefully smaller in relative ones because the rest of the economy will have grown faster."
John Peace, Standard Chartered: "Senior bankers’ pay will be lower."
Q:Will your headquarters still be in London, in 2020?
Douglas Flint, HSBC: "It will be in the best place for us."
Q:Will you still offer free current bank accounts in 2020?
David Walker, Barclays: "Yes, unless the public authority decides otherwise. [This matter] will need a public policy initiative because we can’t change it among ourselves."
Q:Will the public have their trust restored in the banking industry by 2020?
Philip Hampton, RBS: "I can only say yes. The leadership of the banking industry is absolutely committed to change."
