Which? calls for banking overhaul
14 Jun 2010
The United Kingdom's Future of Banking Commission has
today delivered its findings to the UK Government, calling for
profound reform of the banking system.
The cross-party Commission* was chaired by Rt Hon David Davis MP
and developed by Which? following a proposal from Rt Hon John
McFall who, as Chairman of the Treasury Select Committee, wanted to
ensure that the public had an opportunity to voice their opinions
about the future of banking.
The Commission gathered evidence from regulators, consumer groups
and business leaders including Mervyn King, Lord Myners and Lord
Turner as well as executives from the UK's largest banking groups.
However, what set it apart from past banking inquiries, was the
evidence it took from consumers.
The Commission's recommendations aim to put ordinary people and
society at the heart of a reformed banking system. They include
reforms to the structure of banks so if they fail, depositors are
protected; the introduction of new competition and regulatory
regimes that make bank boards responsible for both meeting
customers' needs and for their own solvency, and the creation of a
healthy, professional and ethical culture in financial
Other recommendations by the Commission include:
- 'Living wills' detailing how the collapse of a bank would be
managed and how customers would be treated
- Improvements to depositor protection including a new class of
'safe haven' accounts, which would only be invested in safe
- Restructuring banks so that if they fail, it does not cause
catastrophic damage to their customers or the economy
- The separation of investment advice from the execution of
- That banks' boards, not regulators, should take primary
responsibility for the management and stability of their banks
- Regulation should be used to increase competition among
- Senior executives to be rewarded for long-term business
performance and shareholder return
- A step change in transparency, achieved by a combination of
reform in the accounting rules for banks and credit rating
- A programme of cultural change, which would see, amongst other
things, banks cease paying sales commission to frontline staff
The Commission's recommendations will be delivered to 11 Downing
Street, with the hope that they will shape the Government's policy
on financial reform.
Rt Hon David Davis MP, chair of the Future of Banking Commission,
"Banks provide a vital service to the economy, without which no
modern nation can survive or prosper. Nevertheless, fatal flaws in
the structure, regulation and behaviour of the banks almost
crippled the world economy in the last few years. The United
Kingdom cannot afford to face such a crisis again. Nor can it
afford to allow the fundamental weaknesses in its banking system to
go on, precisely because the economy depends so much on an
effective and efficient financial system.
"The Future of Banking Commission has considered in detail the
root causes of these failures and proposes a range of reforms
designed to improve the service banks give their customers. We have
made recommendations to minimise the conflicts of interest inherent
in banking, and to limit the liability of the taxpayer and thereby
reduce the risk to the economy. We also propose a structure and
regulatory regime designed to entrench a stable and competitive
banking sector for the long term."
Which? chief executive, Peter Vicary-Smith, says:
"Banks can't be allowed to go back to business as usual. We must
never again be faced with a situation where consumers pay the price
for the failures of the banking system.
"A major change in the structure, operation and culture of our
banks is needed if we are to rebuild the trust in our banking
system that was so badly damaged by the financial crisis."
Read the Future of Banking Commission's report and find out more
about the Which? campaign at www.which.co.uk/banking
*The Future of Banking Commission is chaired by Rt. Hon David
Davis MP. Other members of the Future of Banking Commission include
Rt Hon John McFall, Rt Hon Dr. Vince Cable MP (in his capacity as
the Liberal Democrat Shadow Chancellor of the Exchequer), Philip
Augar (formerly a Group Managing Director at Schroders' and now a
writer on the financial services industry), Clare Spottiswoode
(former DG of OFGAS), David Pitt-Watson (Chair, Hermes Focus Asset
Management) and Roger Bootle (Managing Director Capital Economics)
and Peter Vicary-Smith (chief executive, Which?). The Rt Rev
Christopher Jamison was an adviser to the Commission.
Four evidence sessions were held to take evidence from bankers,
politicians, business leaders and consumer groups and Which? held
the Big Banking Debate to gather the views of consumers.
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