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.

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


Our Columnists

Emma Ann Hughes

Emma is editor of FTAdviser and has previously worked for Investment Adviser, Financial Adviser and edited Mortgage Adviser.

Jeff Prestridge

Jeff has been personal finance editor of the Mail on Sunday for a number of years. He writes on a range of subjects and has been a columnist at Financial Adviser since 2004.

Dan Jones

Dan is editor of Investment Adviser and has been a financial journalist for the past nine years. Most recently news editor of a retail fund management publication, he is a previous recipient of the Investment Association's Trade Journalist of the Year award.

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