“Helped on the way by fines of billions of pounds, banks have realised that reputation matters”. These were the words of Sir Richard Lambert, former Chairman of the CBI, when looking at the current banking sector.
But six years on from the credit crunch, when the banking system had to be saved from collapse with taxpayer pay-outs totalling tens of billions of pounds, have lessons really been learnt?
According to the DLA Piper report ‘The Trust Deficit: After the Crash’, the impact of the crisis on corporate behaviour is likely to be minimal. The majority of business leaders interviewed for the report felt that the financial crisis would have little impact on the way they did business.
The DLA Piper report also goes on to state that the internal perception within the industry is that the outside world does not understand banking or indeed the value that it creates for the economy.
So, why should reputation matter? Despite all the turmoil, our ability to attract foreign business is still robust and we are still seen as the financial capital of the world. So, we still have our financial mojo it appears.
Some commentators even think the cases against those implicated in the Libor and FX scandals are weak and “unproven”.
This casual attitude to mainstream perceptions of bankers and reputational damage arising from it was highlighted by a recent Deutsche Bank video circulated to the global investment and sales division where employees were warned: “Some of you are falling way short of our established standards. Let’s be clear: our reputation is everything. Being boastful, indiscreet and vulgar is not OK.”
Colin Fan’s videos directed at Deutsche Bank employees acted as a slap on the wrist:
These were the words of Colin Fan, the co-head of the German lender's investment bank, who flagged that communications within the bank will be subject to increased scrutiny as regulators begin to clamp down on the financial sector. Now, being reprimanded by your boss may go some way in setting behavioural standards, however, the lack of meaningful sanctions is preventing the reputational restoration that the industry needs.
Our media led perception of the archetypal banker is arguably becoming increasingly aligned with characters such as Martin Scorsese’s portrayal of Jordan Belfort, the hedonistic New York stockbroker, who artfully demonstrates how easy it is to sidestep rules, regulations and restrictions for personal financial gain. In a world saturated by stories about bankers and their “ill deserved” bonuses, it is understandable to see how negative stereotypes are continually perpetuated by the media.
Jordan Belfort’s first day on Wall Street:
This status quo could last for a lifetime despite the evident need for change. So, how do we begin to address this reputational issue? Some progress has been made.
1. Pay: There are now increased restrictions around bonuses, including giving banks the power to “claw back” pay where necessary.
2. Bank taxes: Banks are now subject to paying a levy to the Treasury to support the country’s economic recovery.
3. A safer environment: The government set up an Independent Commission on Banking, with the aim of making the banking system safer by ring fencing their retail operations from their investment banking.
4. Regulation: The introduction of the Financial Services Act to replace the current tripartite structure. This will help to increase transparency and accountability.
5. Recruitment: The then FSA (now FCA) has introduced more stringent vetting measures for the recruitment of chief executives and board members.
6. Banking Standards Review Council: A new voluntary standards body designed to work alongside regulators to promote best practice within the industry.
The economic landscape is far broader and more complex than just being about banks. It is all too easy to identify and demonise entities that we are familiar with such as our high street banks. What can we do beyond regulating banks? It is imperative to look beyond the face of the industry and into the heart of it. There is also a bigger financial landscape out there with events such as the Eurozone crisis, the EU referendum, the Scottish vote for independence and the current situation in Russia.
We need to see this political change as an opportunity for us to refocus the lens so we begin to look at the financial system, not as banks, but as a system based on financial markets. Given the macro level rebirth of the financial sector through increased regulation, I have little doubt that the City will weather these political shifts. I think this question is more about how to make that change meaningful to those within the City to ensure that we create long term, sustainable change in both the behaviour and perception of the industry.