Banks' voluntary code of conduct being flouted

Uk Banks' compliance with their own voluntary code of conduct dipped during 2001, according to research by the Banking Code Standards Board. The revelation represents an embarrassment for the industry, which has maintained throughout a spate of recent government-sponsored inquiries that voluntary regulation works.

NOP, the market research organisation, despatched almost 600 researchers between July and September posing as potential customers for a range of banking products as part of its annual "mystery shopping" survey which aims to assess whether the Banking Code is achieving its objectives.

It concluded: "There have been improvements in certain areas, but these are generally only marginal and only observed in relation to certain aspects of the Code. Indeed there has been a fall in some areas of compliance."

The results for the savings accounts were particularly disappointing. "Performance on certain issues has seen a slight improvement from last year, but there were more cases in which the level of compliance deteriorated," NOP said.

One in four assessors were not advised about lost interest applicable in the case of early withdrawal of funds. However, building societies were less likely to flout the code than banks in respect of savings products.

The number of assessors who felt the bank or buildings society had "acted fairly and reasonably" with them fell from 85 per cent in 2000 to 79 per cent last year, with building societies once again outperforming banks.

Describing their overall experience, only 52 per cent of the mystery shoppers said it was "excellent" or "good", down from 56 per cent in 2000. For banks the measure was 49 per cent, for building societies it was 60 per cent.

Almost one quarter of the assessor rated their experience to be either "poor" or "very poor", up from 18 per cent the year before.

The proportion of branches clearly displaying a notice indicating that copies of the Code were available fell by 3 per cent to 49 per cent. Again, building societies bucked the downward trend.

But the study was not entirely negative. Among its more upbeat findings were that information provision on current accounts had improved overall, despite continued failures in disclosure of charges and interest rates. There had also been an improvement in the alerting of customers to charges at the cashpoint.

While the Banking Code Standards Board is funded by the UK banking industry, none of the banks contacted by The Independent yesterday had been aware of the NOP study.

Barclays gave a guarded welcome to its findings. "Some aspects of this are encouraging, but there are some where there's clearly more work to be done," said a spokesman. "We take the Banking Code very seriously. It's part of staff training and a benchmark that we wish to exceed."

A spokesman for the Halifax, the UK's largest retail savings institution and itself a former building society, said: "To have four out of five customers say they thought the service they received was good is a fine result for any industry. The differences between banks and building societies are quite small, and it is good to see hard work on current accounts paying off. While there's room for improvement, it's not all down to the banks."

Lloyds TSB and Royal Bank of Scotland declined to comment.