“Five years after the UK’s most prized industry brought the economy to its knees and ushered in a decade of public austerity and squeezed living standards, a parliamentary commission has reported on the sorry state of the standards and culture that prevailed in British banks. Its recommendations deserve a good hearing.
Any loss of trust in banks carries a huge economic price. That is the raison d’être for the commission and also its justification for its far-reaching recommendations. If trust disappears, credit evaporates, as the financial crisis proved with frightening effectiveness. Upholding standards of conduct is therefore not simply a requirement for protecting the public from the recklessness of banks but a sine qua non of their own success. There are signs that the banks, finally, recognise this.
Still, the banking standards commission does us a favour by loudly asserting that the culture of banks is a serious policy issue and not an instance of misguided banker-bashing. The report also gives a much-needed assessment of how far the cultural flaws that helped to cause the crisis have been improved by reforms to date. Its answer: not nearly enough.
The commission makes a strong case that personal accountability at the most senior level must be strengthened significantly. The report laments “the striking limitation on the sense of personal responsibility and accountability of the leaders within the industry for the widespread failings and abuses over which they presided.”
Read the full Financial Times editorial here