Future of Banking


Banks need the fear of hell and the hope of heaven!

By Daniel Yates

“London: it is innovative, it is brilliant!” declared the Archbishop of Canterbury as he delivered a sermon-like speech with biblical references aplenty on ‘Good Banks’.

The debate, chaired by Stephanie Flanders was held by the St Paul’s Institute in the magnificent surroundings of St Paul’s Cathedral. A rather appropriate location given that the ‘Occupy London’ movement had centred on its doorstep two years ago. Amongst the eminent speakers was the Archbishop of Canterbury himself, Justin Welby the CEO of Barclays, Antony Jenkins and the CEO of Move Your Money, Laura Willoughby MBE.

The view that banks had ‘done bad’ and needed to change appeared to be accepted by all the panel. With the UN estimating that some 100m people have been pushed into poverty because of the banking crisis, one would struggle to argue that banking crises can be ignored.

The Archbishop, who sits on the Parliamentary Commission on Banking Standards, had been putting the finishing touches to the Commission’s latest report on the industry 20 minutes before he rose to the lectern. He argued that the ‘samaritan’ (read banker) is moving ever faster such that he doesn’t see the victim. Whilst capitalism has the power to lift people out of poverty, profit (not in the biblical sense) must be a means to an end, where that end is human flourishment. He said that he his pro capitalism and banking with a moral compass. The Archbishop argued that banks must exhibit governance, responsibility and loyalty. He suggested that at the heart of good banks are good people and that banks needed to operate more like ‘bodies’ than ‘systems’. Whilst ‘bodies’ are aware if there is a problem in another part of the body, ‘systems’ are not. In much the same way that Victorians scared children, Welby proclaimed that “Banks to be good, need the fear of hell and the hope of heaven!”

At times the heated debate felt more like a punch up between Willoughby who sought to convince the audience that all banks were inherently bad and Jenkins who promised that Barclays was good! Willoughby claimed that Barclay’s social responsibility exercises were reminiscent of an empty manifesto. She made a passionate plea to the audience to “vote with your feet – move your bank account tomorrow!”

Eisenhower was quoted as saying “A people who values its privileges above its principles loses both.” Scandals such as PPI and LIBOR have become synonymous with an industry that valued its privileges above its principles. Banks need good values woven into the way they do business to ensure that the mistakes of the past are not repeated.

The truth is that ‘good’ is an abstract concept. Most consumers don’t know a ‘good’ bank when they see one, and when offered a ‘good’ bank many consumers wouldn’t choose it. The Cooperative Bank’s recent downgrade does raise the question as to the sustainability of ‘good’ banking. Could society tolerate the bad that comes with the enormous good that banks do on balance?

Changes in banking after crises are inevitable. This is necessary to convince consumers, regulators and government that the industry will not repeat the same mistakes. However, rest assured, banking crises will occur again.

Summing up the Archbishop said that “we will know we have good banks when they provide what customers want and what the economy needs.”

So perhaps we already have ‘good’ banks, we just want them to be ‘better’.


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