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Can the bank’s leopard really change its spots?

Talking with one of my bank contacts last week was interesting.

He was lamenting the days of true customer focus, as a banker would who joined the bank in the 1980s. After three decades, he's seen it all and the mentality of retailing has been the biggest knock-out blow to the industry he's ever seen.

Admittedly PPI mis-selling has cost the industry over £20 billion in fines and compensation so far. Now we also have packaged accounts, SWAPS mis-selling, hasty foreclosures of business loans, customer data loss and more on the cards.

Does this mean banks have changed their spots?

Not according to my friend, who claims they've just changed the terminology but the mentality is the same.

Instead of sales 'targets', it became 'key objectives' last year and this year is called 'milestones'.

Instead of a 'bonus' for reaching 'milestones', you get 'achievement awards'.

And instead of punishment for under-performing, individuals are sent on 'training' to improve their abilities to advise the customer.

It isn't all doom and gloom in the industry, but the big difference from 1984 to 2014 is that banks would focus upon affordability and appropriateness of their product sales thirty years ago.

During those three decades, it changed.

In the 1990s, we talked about fitness for purpose and know your client from a client factfind point of view.

In the 2000s, banks had become growth businesses fuelled by cheap money and the retail mobsters moved into the game.

The result is that, today, the banks are just focusing upon the sale.

That is why there needs to be more diligence looking over the shoulders of banks, and ensuring that their staff receive the right levels if professionalism.

It is what CBI Chief Sir Richard Lambert outlined in a blueprint for future bank management yesterday: 'an independent champion for better banking standards', funded by the industry.

Andrew Tyrie, Chair of the Treasury Select Committee responded by saying that "it could take a generation to create a credible, effective body".

Or it may never happen.

After all, we have the British Bankers Association, the Chartered Institute of Bankers, the Financial Conduct Authority, the Financial Ombudsman and more, and have had these or things like these for years.

No, the more fundamental change is in the internal management culture of the banks themselves.

As mentioned, the leopard has to change its spots.


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Viv

    Nice Article as always Sir,
    though these days as a layman the number of standards and associations that are formed simply boggle the mind.
    Had read an article recently on the how much gap there is in the adoption of the AIFMD in Europe. The number was staggering. I think just around 20% of the subset have applied for it.
    So i usually look at such drives a bit skeptically. I hope i am proved wrong.
    – Vivek , the Stuggling author

  • No. Having witnessed firsthand the mindset defined in this recent LA Times piece re WFB retail practices( http://lat.ms/1eqY9rn) you would have to make fundamental changes of such a magnitude that no bank forced to answer to shareholders would ever dare to undertake. But Chris I bet you know this fact. If the WFB article and subsequent validation by ex-employees is not a catalyst for some type of management introspection the question is what would make senior retail management truly want to make that change? A regulated mandate? Competitive pressure from a disruptive business model or technology? This is a business model that at the highest level sees no reason to make organic, profound changes until forced. Bring on the new models, this one is broken.