In reaction to the startling misconduct of banking executives that preceded the 2008 financial crisis and (as if they hadn’t learnt their lesson) following the interest rate Libor scandal in 2012, the Financial Services Culture Board (FSCB) was established in 2015.
When bankers lose it all, it can have a significant impact on everyone. The Banking Standards Board, which was formerly known as the Financial Services Council, was established with the goal of “helping raise standards of behaviour and competence” in the financial services industry. It conducted employee surveys and behavioral trials, published research, and helped its members exchange best practices.
It was discreetly closed in June of this year, and with it, bankers’ responsibility began to erode.
Banks paid annual fees to the FSCB, which combined probably didn’t even come close to covering a C-suite salary. It wasn’t an interbank chess club; rather, it was an organization founded in response to widespread cultural failings in the business that threatened the entire basis of our economy.
Its responsibilities included, but were not limited to, assisting banks in developing a “speak up culture” and efficient whistleblower programs. Its goal was to inculcate specific ideals in bank executives and other individuals with leadership roles.
After all, for a long time—far longer than estate agents—the reputation of a once highly esteemed profession had been crushed beneath the skin of a snake.
The FSCB was an effort to address the fundamentally corrupt nature of banking.
However, the banks have determined that the FSCB’s mission is essentially complete. Indeed.
The former FT editor Sir Richard Lambert led the panel that recommended the establishment of the FSCB, and he specifically chose not to comment on its closure, which was caused by the banks cutting off funding.
That was ironic in timing. Less than 20% of individuals surveyed by the Financial Conduct Authority (FCA) expressed satisfaction with the FCA’s response to their concerns, prompting the FCA to announce in May 2023—a month before the FSCB terminated operations—that it was revamping its approach to whistleblowers.
The UK regulator’s capacity to detect criminal activity and rule violations at an early stage is weakened in the absence of whistleblowers. Even worse, the illicit or unlawful activities of bankers go unabated, build up, are finally uncovered, and erode public trust in the industry that powers the whole UK economy.
Three weeks before Alison Rose resigned from NatWest over the Nigel Farage banking scandal and before she was scheduled to get millions from a bank that the British taxpayer still controlled 38.6% of, the organization devoted to assisting banks in raising “standards of behaviour” dissolved.
Having held executive positions in retail and investment banking, I have direct experience with how small transgressions may spiral out of control.
With absolute certainty, I can state that minor transgressions that result in a desired outcome without consequences—whether they go unnoticed, which is rare, or by someone turning a blind eye, which is much more common—mark the start of what can soon spiral into enormous, systemic failures.
The most hazardous behavior is turning a blind eye, and this “tacit approval by silence” mentality needs to end. Nobody can honestly claim that since 2008, the cultural integrity of the banking sector or the behavior of its employees has changed. Between June 2022 and June 2023 of that same year, banks were penalized £178 million for regulatory violations.
In contrast to their cooperation with the FCA, whose regulations banks must abide by to continue engaging in regulated activities, they have the authority to remove their financial.
The banks are the corporate personification of the idea that no one can ever be protected from themselves. This is the worst conceivable time for the sector to lose its conscience, as laws become stricter and the economy becomes more difficult. Banks cannot be trusted to self-regulate, as history has demonstrated. It needs to be replaced with a new ethical body, which ought to be required this time.