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My Lords, I am grateful to my right reverend friend for leading this debate and I welcome the Minister to his new role. I want to focus on the recommendations in the original report—the references in paragraph 138 of the summary, volume 1—which looked at culture change. The response of the banking industry to that challenge came through a report produced by Sir Richard Lambert, which said that if the banks didn’t face up to this, there will be further intervention, regulation and direction. As a result, the UK Banking Standards Board was set up in 2015. I declare my interests in that I am a founder member of that board and also part of the ad hoc Financial Exclusion Committee which has been referred to already.
The aims of the Banking Standards Board are, first, to provide tools and voluntary interventions which are available to members of the board—there are over 31—for assessing different sizes of banks, building societies and other financial institutions, so that they can understand how culture change is going, if it is going at all. Secondly, there are the important elements of supporting regulation responses and how to perform in relation to the regulations. Thirdly, the aim of the board is to strengthen and encourage trustworthiness—a word that has already been referred to—in an industry that sorely lacks it.
My remarks are about soft power rather than the hard power architecture required for the banking industry, which must go alongside the business, legal and ethical demands that frame any healthy operation or organisation. What about the annual assessment? It sounds like box ticking, but that has not been our experience. The nine areas of assessment are very obvious. How would noble Lords feel, in their organisations—just as I would in mine—about being assessed annually, on competence, reliability, responsiveness, personal organisation and resilience, accountability, openness, respect, honesty and shared purpose? In a sophisticated analysis that is kept privately to each bank but then anonymised across the industry, leaders of banks and their staff can see how they are doing in particular areas of the industry that matter in terms of their internal and external organisational culture. It is, if you like, a mirror of honesty put up in front of the organisation.
Then of course there is the need for regulation support. We have already heard from the noble Baroness, Lady Bowles, about the senior management certification regime. The Banking Standards Board has today published its fourth good practice guidance on regulatory references, based on the principles of proportionality, fairness and consistency, in order to try to make real some of the theory and some of the things that we know are needed in an industry that has struggled in these areas. This is to try to help a profession to renew not only its confidence in itself and public confidence in it but also its sense of pride—the sense that it is possible to do well in an industry whose reputation has been ruined by the last few years, particularly 10 years ago.
The third issue, which has already been mentioned, particularly by the noble Baroness, Lady Coussins, is trustworthiness. This is something that is not legislated for or bought—it is given to an organisation. As was illustrated by my right reverend friend, there is still a long way to go to restore confidence in what is called the banking industry’s social licence to operate; it is still under suspicion. We have moved from a close study of markets that need to work efficiently and effectively for the good of the consumer as well as for business, and we have looked at transparency and ethics, but now there is the heavy work of trustworthiness in relationships, from the biggest picture—we have talked about macroeconomics and the social good of banks—right the way down to the detail of a functioning, profitable and, perhaps we might say today, unsubsidised business.
The values that underpin a healthy society and healthy banks are easily ignored and eroded. The noble Lord, Lord Skidelsky, said very succinctly:
“The capture of culture by the market was made possible by the disappearance of ways of life and habits of thought which had sustained traditional culture. Culture became a market brand dreamt up by entrepreneurs, advertisers and satirists”.
Noble Lords will get the point that the erosion of our ordinary ways of doing things became extreme in the industry, and in some respects it still is.
We have just been discussing the renewal of this building. I am worried that in the refurbishment we might erode our own labels in the Sovereign’s Robing Room that read “Courtesy”, “Religion”, “Generosity”, “Hospitality” and ”Mercy”. How often are we able to trip those off our tongue? They were put up there in a vision of a culture that worked for the betterment of others and for the development of an economy that actually worked.
I have some questions for the Minister. Will Her Majesty’s Government affirm and encourage the soft-power work of the Banking Standards Board alongside the important work of regulations and law? Will they also see that this is not only a matter for one industry singled out but for all of us in terms of how we see ourselves, how we operate and how we understand our wider responsibilities beyond the project or responsibility that we actually have?
I would like to ask another question, especially at this time of introspective and very tense political life. When we have calmed down a bit in the weeks ahead, will Her Majesty’s Government support and encourage a wider debate in which we can think of the wider financial context in which the banking industry sits and the wider needs of society, to rebuild trustworthiness in not just the City but our political and social institutions? As we have already heard, this is about joining up bits of our society that are profoundly fragmented. We do this when we take time, like this, to think more widely and see how we personally are responsible for the things that happen. It gives us the potential to join up law, consumers, exclusion and trustworthiness.
Will that also be part of a courageous intervention into how the objectives of businesses and banks are set? Will responsible investment touch the way that banks operate? Can we see a time when, as society is already telling us, it is not just the bottom line that matters, but how the industry, through its investments, affects climate change, or takes responsibility for artificial intelligence? These big areas are difficult to legislate but are fundamental to what people in our society care about. Banks have enormous power and influence in those areas.
I will finish with the words of someone who has already been quoted, the current Governor of the Bank of England. He said that banks must recognise that:
“Only exemplary behaviour can confer … social licence”,
to global financial capitalism. He also stated, more fundamentally:
“Integrity cannot be legislated, and it certainly cannot be bought”.
Only a perspective which takes into account the wider implications of actions can guide proper behaviour.