Banks must undergo ‘profound reform’, putting ordinary people and society at heart of an improved system, according to a heavyweight group of industry leaders and politicians.
The ‘Future of Banking Commission’ gathered evidence from regulators, consumer groups, business leaders including Bank of England governor Mervyn King, Lord Myners and Lord Turner, and executives from the UK’s largest banking groups.
Its recommendations include reforming the structure of banks so if they fail depositors are protected and introducing new competition and regulatory regimes that make bank boards responsible for meeting customers’ needs and for their own solvency.
Other recommendations include separating investment advice from trading, increasing competition among banks and putting an end to banks paying frontline staff sales commission.
MP David Davis, chair of the Future of Banking Commission, said: ‘Fatal flaws in the structure, regulation and behaviour of the banks almost crippled the world economy in the last few years’.
‘The United Kingdom cannot afford to face such a crisis again. Nor can it afford to allow the fundamental weaknesses in its banking system to go on’, he added.
Davis said the commission's recommendations aim to minimise the conflicts of interest inherent in banking, and to limit the liability of the taxpayer and thereby reduce the risk to the economy.
Peter Vicary-Smith, chief executive of Which? said: ‘We must never again be faced with a situation where consumers pay the price for the failures of the banking system’.
‘A major change in the structure, operation and culture of our banks is needed if we are to rebuild the trust in our banking system that was so badly damaged by the financial crisis,’ he added.
A spokesperson for British Bankers’ Association said that although it agrees with many of the objectives for banking reform it believes industry initiatives already under way point towards far better ways of tackling underlying problems.