Watchdog calls on banks to clean up their act from the top

FSA chief warns free banking may have to end to stop mis-selling

A change in culture from the very top of the banking industry is needed to rebuild a cynical British public's trust in the sector, the chairman of the City's financial watchdog said yesterday.

In a wide-ranging speech, Financial Services Authority chairman Lord Turner called on bank bosses to act as "custodians of institutions of great public interest, as well as custodians of shareholder value".

He warned the end of free current accounts might be needed to drive more competition into the sector and move away from a model where banks sought profit instead from higher-margin products, leading to the mis-selling of payment protection insurance.

Referring to a recent Economist headline labelling industry bosses "Banksters" in the wake of the Libor scandal, Lord Turner said executives needed to put aside the temptation to boost profits through technically legal means "which go against firm values".

He appeared to single out the complex efforts of Goldman Sachs to disguise the scale of Greece's deficit ahead of the nation's entry into the single currency, saying: "In an investment bank, if a fancy new product design will enable a corporate or a country to conceal from the market the scale of its indebtedness … does the top management and the board say 'Congratulations, take a bonus' or does it say, 'That's not what we do'?

He warned: "There is no value in beating about the bush. Unless management and boards themselves shift the tone from the top in such specific ways, and in addition make effective controls against dishonest behaviour the highest priority throughout the organisation, then we are not going to change the external perception of bankers."

Lord Turner refused to comment on whether authorities should have spotted Libor fixing in 2007 and 2008 when banks were submitting lower rates of money-market borrowing costs to calm nerves over their ease of funding.

But he denied the FSA could have spotted earlier manipulation of the rate to boost profits on derivative contracts "except via supervision so intensive as to be prohibitively expensive".

Barclays has been fined £290m over libor-fixing, which has claimed three boardroom scalps including chief executive Bob Diamond.

Lord Turner said the current set-up in high street banking, where the accounts of customers in credit are subsidised by the overdraft charges of others, "was not a sound basis for a long-term trust-based relationship between the industry and its customers".

But he added the industry would only be ever able to move away from the model of free current accounts if regulators, politicians and consumer groups support the case "rather than accuse them of profiteering".

Fresh start: Salz to put house in order

Barclays has drafted in Anthony Salz, a leading corporate lawyer, to conduct a root-and-branch review of the bank in the wake of the Libor scandal that has forced both its chairman and chief executive to quit.

Barclays said the review "will assess the bank's current values, principles and standards of operation", test how well current decision-making processes incorporated the bank's values, and assess whether appropriate processes were in place.

The bank has committed to implementing Mr Salz's recommendations in full.

Mr Salz, who will have a deputy and a team of accountants to assist, said he hoped the review "would significantly assist Barclays in rebuilding trust and reaffirming its position as one of our leading institutions".

Suggested Topics
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
News
people
Life and Style
techApp to start sending headlines, TV clips and ads to your phone
Arts and Entertainment
Taylor Swift crawls through the legs of twerking dancers in her 'Shake It Off' music video
musicEarl Sweatshirt thinks so
Life and Style
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Planning Manager (Training, Learning and Development) - London

£35000 - £38000 per annum + benefits: Ashdown Group: A highly successful, glob...

Asset Finance Solicitor

Highly Competitive Salary: Austen Lloyd: CITY - ASSET FINANCE - An outstanding...

HR Analyst - Banking - Bristol - £350-£400

£350 - £400 per day: Orgtel: HR Analyst - Banking - Bristol - £350 - £400 per ...

Techincal Accountant-Insurance-Bank-£550/day

£475 - £550 per day + competitive: Orgtel: Senior Technical Accountant-Insuran...

Day In a Page

Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?
Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

'I want to have contact with the audience, not iPhones'

Kate Bush asks fans not to take photos at her London gigs
Under-35s have rated gardening in their top five favourite leisure activities, but why?

Young at hort

Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

Beyond a joke

Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

Sadly though, the Lawrence of Arabia star is not around to lend his own critique
Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

A wild night out

Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

Comic Sans for Cancer exhibition

It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

Besiktas vs Arsenal

Five things we learnt from the Champions League first-leg tie
Rory McIlroy a smash hit on the US talk show circuit

Rory McIlroy a smash hit on the US talk show circuit

As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
Boy racer Max Verstappen stays relaxed over step up to Formula One

Boy racer Max Verstappen stays relaxed over step up to F1

The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
Fear brings the enemies of Isis together at last

Fear brings the enemies of Isis together at last

But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment