Written by James Thomas on Tuesday October 8, 2013
It would be an understatement to say that the financial sector has an image problem. Scarcely a day passes without the emergence of some new financial debacle or the imposition of some new high profile regulatory sanction.
As a result, the public’s confidence in the system remains woefully low, and many parties – politicians, regulators, banks – have therefore emphasized the importance of restoring the trust that has been lost. However, doing so appears to be an extremely long term exercise. The fact that we have recently marked the fifth anniversary of the collapse of Lehman Brothers illustrates the point: sure, a huge amount has happened in the intervening years in terms of regulatory output, meaning that compliance practitioners have been incredibly busy, but translating this activity into restored reputations appears to be a distant dream.
Indeed, recent research underlines the fact that it’s not only amongst the general public that confidence in the system remains low. Research from data management provider AutoRek suggests that, five years on from Lehmans, some 46% of financial executives believe that the next crisis will be caused by a breakdown of financial checks (i.e. they fear that a repeat of the US subprime mortgage debacle could be on the cards).
So what is being done to restore trust and confidence? One recent step was the announcement that Sir Richard Lambert will head up a new body to introduce standards of conduct in banking (in line with the wishes of the Parliamentary Commission on Banking Standards [PCBS]). The establishment of this body raises innumerable questions, but the one of immediate interest here is whether it will go any way to improving the image of banking: whether it is a necessary and sufficient step in restoring the credibility of the sector, or whether it will merely be window-dressing. It remains too early to know, but it’s worth considering the view expressed by PCBS Chairman Andrew Tyrie MP, who suggested that it may take “at least a generation” for an effective body to be established. This is hardly a swift and decisive solution.
So, what do you think? How can the financial sector effectively restore trust? Indeed, is a “quick fix” even possible? And can compliance play a role?
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