Lord Turner calls for a change in culture at banks

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

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

Referring to a recent headline in The Economist labelling industry bosses "Banksters" in the wake of the Libor rate-fixing 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. Lord Turner said: "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."

THe refused to comment on whether authorities should have spotted Libor fixing in 2007 and 2008 when banks submitted lower rates for money-market borrowing costs.

But he denied that the FSA could have spotted the 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 its role in fixing Libor, which has claimed three boardroom scalps at the bank, including the chief executive Bob Diamond and the chairman Marcus Agius.

James Moore, Outlook, Page 41

Lord Turner also warned that the end of free current accounts might be needed to stop banks from seeking profits from other products, increasing the risk of mis-selling scandals such as PPI.