Financial Services Bill

My Lords, during the Queen’s Speech debate in November 2009, I made a short contribution about customer involvement and engagement with retail banks. I wanted to say something more about that this afternoon and to encourage my noble friend the Minister, for whom I have the greatest respect, to think widely and laterally about how he might do more to engage customers and give them the opportunity to influence events before they happen. Already, only two speakers into this debate, we are concentrating on redress and compensation, which means dealing with customer problems when it is too late. We need to think about ways in which we can engage customers in a meaningful dialogue with their retail banks that is helpful to all parties but avoids the pitfalls of the past. In my previous contribution I was essentially arguing that a heavy reliance on regulation—the FSA in particular—is a top-down approach. To help customers, we really need to pay closer attention to what can be done from the bottom up. What can be done to give customers more say—even some power, perhaps—in how they regulate their own relationships with the banks? I drew attention to how customer engagement was the hallmark of the mutual sector, where customers or members can attend annual general meetings, debate motions with the board of directors, elect directors to the boards of mutuals and take part in a whole range of activities that engage them with their banks or building societies in a way that does not happen in the private sector. I recognise that the private sector is different and that customers do not own the banks. I understand that shareholders own them; Governments might own them in the short term but in the long term the banks belong to shareholders. However, I believe that there is a strong case for giving the rest of the bank’s stakeholders—its employees and customers—a much greater say in how the bank is governed and managed. In my previous contribution, I asked the Government to think about three things. First, would it be possible to have the equivalent of an annual general meeting for the customers of banks? Obviously it would have to be organised in a different way, but there would be an opportunity for a group of members to engage with the chief executive officer and other directors to discuss how the bank is performing and how that performance affects stakeholders—the customers of the bank. Secondly, I asked for an annual customer meeting in those regions where a bank has more than 10 branches. Thirdly, I asked for banks over a certain size, which is to be determined, to have a consumer council or council of members that would meet at least four times a year with—this is crucial—the chief executive officer and the directors to debate the bank’s performance and to get the customer view of that performance. Following the debate last November, I decided to put these proposals to the chief executive officers of five retail banks that I selected at random. I had substantive and helpful replies from John Varley at Barclays, Eric Daniels at Lloyds and Stephen Hester at RBS, to whom I am grateful for their time and consideration. All made a good case for a traditional, top-down approach to customer relations. HSBC has apparently been unable to find my letter and I have heard nothing from Mr Hoffman at Northern Rock. With this information as a background, I want briefly to press the case even more firmly for a new, bottom-up customer engagement approach that involves customers and gives them rights about how they should be consulted and engaged with by their banks. I want to see customer engagement that goes beyond what the chief executives outlined in their letters, such as satisfaction surveys, customer panels and focus groups. All those are things that banks do regularly and successfully, but I want them to bring their customers together with the chief executive officer and other directors for a period of half a day or perhaps a day in order to have a meaningful debate on an agenda that can be mutually agreed, but agreed in a major way by the customers themselves. I want to see an end to the customer as the passive recipient and a start of customer power. I want customers, not the banks or politicians, to set the agenda on the issues that they want to talk about. I want the debate to be between the customers and the board and to have directors pay real attention to what customers think about topics that customers decide. If we can do this—and I believe we can—we could open up the banks to real customer engagement. If we can replace banks’ questions down to customers on things such as, "Do you find our staff friendly?"—a fair and important question—with real questions such as, "Will you tell us and have a real debate about what you think about our remuneration policy?", we will be moving away from the normal stuff towards hard debate between customers and the people who run their banks. That is the sort of thing that I am looking for. We can change the behaviour of the banks and we can change the paradigm of bank and customer consultation. In doing that, we can change the culture of how this stuff works. To achieve bottom-up stakeholder and customer engagement, we do not necessarily need legislation; I understand that. The banks could do this, but I do not think that they will. Are the Government, whom I admire and greatly respect despite all their problems, prepared to stand on the side of customers and give them some real power? That can be done either by pressing the banks to do some of the things that I am arguing for or by putting something in the Bill that would help to move in that direction. I do not know what could go in the Bill or even how to do it, but I still feel strongly about what needs to be done and I hope to be able to work with the Government to make something more meaningful happen than what we have at the moment or have had in the past.