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Lessons from collapse of Lehman Brothers and GFC a decade ago to be in keynote speech at FINSIA Summit 2018

by Lewis Panther | 14 Sep 2018

The collapse of Lehman brothers a decade ago was one of the defining moments of the global financial crisis, with many pointing the finger of blame at bankers. Here FINSIA gets the views from someone who helped put the industry on the road to recovery.

Dame Susan Rice, Chair of the Chartered Banker:Professional Standards Board in the UK, who is giving the keynote speech at Summit 2018, talked to FINSIA partner AB+F on how a professionalisation strategy for UK banking boosted consumer trust and pride in the industry.

Amid the global financial crisis, Dame Susan Rice and colleagues from the Chartered Banker Institute looked in dismay at what was unfolding in the UK banking sector. 

It was a time, Rice recalls, where many bankers – though certainly not all – had lost sight of the their purpose. 

“Like all businesses, banks exist for a purpose. They are there to support economic activity and create personal wealth,” she says. 

“For many years, people became absolutely focused on selling and forgot that purpose. They lost sight of how banking should be delivered. It was overlooking the ‘how’, as distinct from the ‘what’, which led to poor judgement.” 

For Rice, change needed to come from within. 

“If this industry can’t do something for itself, if it can’t improve from within, then we are in a pretty sorry state. I knew the spotlight was coming from government and regulators. We needed to do something from within the industry as well and that was to create a set of professional standards.”

The former banking executive – Rice was the first female chief executive of a British clearing bank – also highlighted an interesting point, that banking was perceived as an industry not as a profession. 

Yet the sector had a license to operate, it was “asymmetric” in knowledge, that is a banker has more knowledge than its customer. It was also an industry where general expertise and knowledge was required. 

“These aspects make it a profession, but we never talked about the industry as a profession. Professionalism delivers accountability and confidentiality so that banking can deliver for the public good.”

Rice, with senior colleagues from several banks and the team at the Chartered Banker Institute – the oldest banking institute in the world – “put their heads together” and developed a set of professional standards.

The Chartered Banker pathway supports practitioners at all levels - from the Foundation level, right through to the Chartered Banker certification and it’s a program also now adopted by FINSIA.

Rice said what these professional standards aim to do is provide a framework for individuals working in banks that guides personal conduct and responsibility within the industry. Alongside these Standards, the more recent Banking Standards Board is exploring cultural issues for institutions that also sit above regulation.

Importantly these Standards are leading to positive customer outcomes since they were introduced starting in 2013. 

Indeed, its Foundation Standard has been embraced by close to 200,000 UK bankers. “Our goal is to increase confidence in the banking community and also help engender trust. This is important as trust has to be bestowed, you can’t train people to be trusted,” she said. 

The strategy is paying off. Research to date – based on independent surveys - reveals a 41 per cent consumer trust level in banking in 2017, up from 31 per cent five years ago. Similarly, there is growing confidence from UK politicians, around 69 per cent of British members of parliament now perceive banking to be professional, up from 49 per cent five years ago.

Equally important was that professionalism also instills pride within bankers.

 “A lot of bankers lost their heart through the GFC. Confidence levels, however, have since increased – with a higher percentage of bankers now identifying with a higher pride score.”

While the data support growing trust with UK banks, Rice adds that more work still needs to be done and in part this will go to communicating the benefits of professionalism.

“It can be a challenge communicating with banks, government, shareholders and investors about the benefits of professionalism. A lot of the time, people don’t understand the difference between standards and qualifications.”  Executive support will be key as well as an ongoing communication program through continued public speaking as well as constant engagement.

“Every bank CEO publicly talks about the right way to do business. It is what happens beneath that level that matters. We have been working with banks on how to communicate the benefits of a professional program to their employees.”

As the UK banking sector continues to attract greater trust levels through its commitment to professionalism, Rice has a number of lessons for Australian banks. 

As revelations of the royal commission continue to test consumer trust, Rice acknowledges that such a “public magnifying glass may not be comfortable” but it is important in raising issues around conduct.

“It’s then important for the industry not just to wait and be told what to do. Banks need to take hold of the situation. In the UK there is now a greater focus on culture with bank boards engaging directly on the issue.”

Another key lesson is not to focus only on regulation. “Regulation can’t prevent every problem, it is there to provide guide posts. If banks rely solely on regulation, their resources will be dedicated to meet the thrust of regulation and perhaps overlook problems. An environment that supports professionalism supports a framework that allows bankers to make good judgments.”

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