My Lords, historically, bank managers were much trusted to act in the best interest of their clients, especially when I was a child. Sadly, however, today consumers and small businesses no longer retain that trust. Bank staff have been incentivised to sell complex and sometimes worthless financial products, such as interest rate swaps or PPI. Lloyds alone, for example, has had to set aside £5.3 billion to make good those mis-sellings. We need a banking system which is trusted: a return to old-fashioned stewardship banking which serves every region, business and family in the country. This demands professionalism, which this amendment seeks to embed within the Bill.
Ministers and regulators have both spoken about the importance of instituting cultural change within firms. The then FSA Chief Executive Hector Sants argued that regulators should,
“ensure firms have the right culture for their business model—the right ethical framework—to facilitate the right decisions and judgements”.
Earlier this year, in setting out his vision for a “new orthodoxy” in financial services, Martin Wheatley said that he wanted a world,
“where the culture of firms, from product governance to sales, is aligned with the best interests of the customer”.
These amendments seek to promote such a cultural change by ensuring that FCA supervisors judge professional standards when assessing the conduct risk posed by firms.
Professional standards are vital. The higher a practitioner’s commitment to professional standards, the lower the likelihood of customer harm. Likewise, high levels of professional standards are linked to increased consumer trust and confidence. However, the Bill makes no reference to professional standards, despite the recommendation of the Joint Committee and the evidence of incompetence and even dishonesty. This is a significant omission. Were they written into the Bill, the regulator would have greater persuasive powers and there would be a power incentive for firms to embed higher standards at every level. This would enhance consumer protection and underpin the integrity of the UK financial system. I beg to move.
4.15 pm