We use cookies to improve site performance and enhance your user experience. If you'd like to disable cookies on this device, please see our cookie management page.
If you close this message or continue to use this site, you consent to our use of cookies on this devise in accordance with our cookie policy, unless you disable them.

Close
In association with

Home > Opinion > Philip Ryley

FSA highlights decline of trust

Lord Turner says that while banking sector is a vital contributor to the UK economy, competitors abroad draw attention to its failures.

By Philip Ryley | Published Aug 15, 2012 | Your Industry | comments

Last month Lord (Adair) Turner, chairman of the FSA, gave a clear and blunt message to the banks in a speech entitled ‘Banking at the Crossroads: Where do we go from here?’

He made significant reference to The Economist front page headline a few weeks ago of ‘banksters’ and said that when such a respected magazine suggests that banking is riddled with malpractice, its “credibility shot”, trust evaporated, we have a major problem.

The major problem identified by Lord Turner was that although the bank community is a vital contributor to the UK economy and it plays a crucial role in a vibrant market economy, its excesses and failures are issues that our competitors abroad are only too happy to draw attention.

Lord Turner identified three key drivers of declining trust in the UK banking system:

* People have come to doubt the economic benefits of financial liberalisation and of much banking activity.

* They doubt banks’ values.

* They doubt whether banks have their best interests at heart.

Lord Turner criticised the assertions made ahead of the banking crisis of the economic benefits that lay ahead for all of us arising from innovative banking activities that ultimately spearheaded the banks’ rationale for justifying huge bonuses. Lord Turner said that the complexity and opaqueness of investment bank innovation contributed to the banking crisis and referred to various published third party quotes revealing “a dealing room culture of cynical greed”.

As to where do we go from here, to rebuild trust in the banking system and rebuild recognition of the vital role which a well-run banking system plays within our economy, Lord Turner suggested five elements of response:

* Better prudential rules and new macro-prudential policy approaches.

* structural changes, following the Vickers Commission.

* Better, more intense and more robust conduct supervision and enforcement.

* Action by bank leaders to improve culture and values.

* Recognition by the regulators, politicians and consumers of the challenges that the banks now face.

Leaders of banks will be heedful of this speech.

Philip Ryley is a partner and head of financial services and markets of Michelmores LLP

COMMENT AND REACTION

Our Columnists

Hal Austin

Hal is editor of Financial Adviser and has been for more than a decade. He has previously worked on a number of local and national publications.

Ashley Wassall

Ashley is editor of FTAdviser and writes on all areas of retail finance. Previously supplements editor at Money Management and editor of a European private equity publication.

John Kenchington

John is editor of Investment Adviser and has written about investments for several years. He has worked at titles including City AM and was recently named in the MHP 30 To Watch list of up-and-coming media names.

Jon Cudby

Jon is editor of Money Management and has 12 years' experience covering retail personal finance. In 2005, Jon was launch editor of FTAdviser and most recently he was head of online content for Incisive Media's financial services titles.

Tony Hazell

Tony is a freelance financial journalist, having been editor of Money Mail at the Daily Mail for a number of years. He has been writing a column in Financial Adviser since 2005.

John Lappin

John is a weekly contributor to Investment Adviser with 15 years’ experience in financial journalism and 10 years writing on the IFA sector. He was formerly editor of an IFA trade magazine.

Most Popular
More on FTAdviser
FTA jobs