Every bank employee “from the teller to the chief executive” must have their incentives reformed so that it is in their best interests to help customers, George Osborne will be told this week.
Julien Sevaux, co-founder of $8.5bn (£5bn) investment firm Stanhope Capital, is currently drafting a letter to the Chancellor outlining his ideas to “make all bankers customers”.
His firm has good links to the Conservative hierarchy as Derek Laud, a prominent party member and former Big Brother contestant, is on the advisory board.
In the aftermath of Sir Richard Lambert’s Banking Standards Review and the competition regulator’s announcement last week of an inquiry into the dominance of the big banks, Mr Sevaux argues the industry will only improve its record if it adopts practices more common in fund management.
This would involve “alignment of interest”, which in Mr Sevaux’s industry would mean a fund manager investing in the structured product that he or she is overseeing.
Mr Sevaux thinks this could be looked at “job by job” in banking. One option would be for investment managers to have part or all of their bonus invested in a client’s fund, pushing them to do well for both clients and themselves.
His call comes as the Serious Fraud Office is poised to launch a criminal investigation into foreign exchange rigging – the latest global banks scandal. Financial regulators around the world are probing more than a dozen banks over allegations that traders manipulated key benchmarks in the £3.1 trillion-a-day market. It is claimed clients may have lost money because of this.
Mr Sevaux believes staff at every level of banks should be asked how their interests and the customers could be linked.
“Making the customer the key benchmark of behaviour is key,” he told The Independent. “This is well applied across industries, yet in banking seems to have got lost, possibly because of the somewhat dematerialised nature of financial services.”
The Competition and Markets Authority announced on Friday it was recommending a full probe into current accounts and small business banking. This has sparked fears in the City that high street banks could be broken up, with the biggest four – Barclays, Lloyds, HSBC, and Royal Bank of Scotland – providing 77 per cent of current accounts. Mr Sevaux argues the inquiry, expected to take 18 months, will simply “come to the conclusion there are too few banks, which we know already”.
The Banking Standards Review has spawned an eponymous council charged with improving conduct in the industry, which will be up and running by the turn of the year. It is currently looking for a chief executive and chairman, though Mr Sevaux, a former senior M&A banker at Lehman Brothers, is only interested in an advisory role.