The new banking standards authority, which is to be set up in the UK, will focus on conduct, capability and customers within the industry.
Sir Richard Lambert, head of the UK’s Banking Standards Review, a former director general of the Confederation of British Industry and a former member of the Bank of England’s Monetary Policy Committee, writing for City AM, said the authority will work with banks involved in the process on programmes of continuous improvement.
He noted that current regulators are able to punish clear wrongdoing in the banking industry, but find it much more difficult to legislate for what is considered good behaviour. The lack of rules and regulations in this area means some people tend to be of the opinion they can do what they want, as rules are not written down.
The main thrust of the new body will be to work with banks to ensure consumers are treated fairly. The first step in this process will be to ask each participating bank how far its code of conduct is incorporated into the daily operations of its business, and is understood and followed by everyone.
They will report on issues like whistleblowing, diversity and discipline, and on the progress employees are making in terms of training and development.
The way customer complaints and feedback is handled will be another major focus, as well as working on the relationships banks have with regulators. The new organisation will assess the quality of these reports, and help the banks and building societies to understand how they stack up against their competitors.
Many of the major banks operating in the UK have backed the new authority and a consultation paper has been produced to shape the final proposals for the initiative.
Sir Richard, writing for City AM, said: "At this early stage, however, it’s important to be clear what this project is - and is not - about. It’s not a substitute for strong and determined leadership from the banks themselves.
"If they don’t get a grip on the shoddy practices and bad incentives that have plagued their businesses in the past decade, this new body will be a waste of space."
He went on to note that the new standards body will not attempt to overrule or override the current system of regulatory bodies within the industry or crack down on the bonuses paid in the banking sector.
By Asim Shah