Time for a Big Change in banking?

Miranda Akhurst, Senior Advocate for Which? UK, explains why we need a Big Change in banking.

After the LIBOR scandal that unravelled in the summer, the Government launched the Parliamentary Commission on Banking Standards to investigate the culture and professional standards in the banking industry and to suggest ways to improve them. It has also been asked to scrutinise the Banking Reform Bill — the Bill that will, among other things, bring in the ring fence that will force banks to create a clear separation between their high-street retail and investment arms, protecting consumers’ savings from risky investments. The Commission is essentially a group of MPs and members of the House of Lords who are gathering evidence from different individuals and organisations before presenting their findings back to the Government.

At Which? we want to see a big improvement in the way banks treat their customers. This is why we launched our Big Change campaign, and are asking the Commission to make strong recommendations so that we have banks for customers, not bankers. The Commission has come at a time when the public’s trust in banking is at an all time low.

When we asked consumers about their views of the banks only 11% of people trusted bankers to act in their best interests. There has been scandal-after-scandal in the banking industry — from government bail outs to big bonuses; and from the mis-selling of financial products such as PPI to the recent LIBOR scandal.

Banks across the board were involved in pushing customers to take out Payment Protection Insurance (PPI) who wouldn’t benefit from the product. Collectively the banks have set aside £10.2bn for refunding customers who complain, however, Which? research has found out that this might not be enough. Lloyds, for instance, could run down the pot of money they set aside as early as next month, and will need to allocate even more money to repay customers. The number of people complaining about being mis-sold PPI more-than-doubled in the last 6 months, and it doesn’t look like the complaints will end any time soon.

Which? wants to see a Big Change in banking culture, including higher levels of professional standards and a code of conduct that bankers have to abide by. Bankers need to put customers first instead of their sales targets — we want to see an end to bankers peddling products customers don’t need. We want banks to reward staff for excellent customer service, rather than the amount of sales they make. The steps the Co-op and Barclay’s have recently made on this front are a step in the right direction. As well as incentives for good behaviour, we also want regulators to be given the power to punish bankers when they mis-sell a product or don’t act professionally.

So enough is enough, we need a big change in banking. While some banks do treat their customers better than others (in a Which? customer satisfaction survey, First Direct, Smile and the Co-operative Bank came out on top), there are systemic problems in the banking industry which require the Government to initiate a Big Change in banking culture.

Which?’s Big Change campaign calls on bankers to:

1. Put customers first, not sales
2. Meet professional standards and comply with a code of conduct
3. Be punished for mis-selling and bad practice.

If you agree with us that a Big Change in banking is needed, please sign our pledge. Click here to find out more.

This story was originally published at moveyourmoney.org.uk in 2012.