Mervyn King: Banking culture must changeEnd bail-outs, bonuses and sales incentives.
26 February 2010
Witnesses from the City, banks, academics and members of the public told the Future of Banking Commission this week that incentives, including bankers bonuses, are wrong, and the culture of banking must change so that it's fairer for consumers.
Mervyn King, governor of the Bank of England, launched an attack on the way the banking sector has operated in recent years, criticising its reliance on the taxpayer to bail it out. He was adamant that in future banks should be more responsible, and be allowed to fail, although consumer deposit accounts should be protected.
Speaking at the second Future of Banking Commission hearing, which was convened to provide an opportunity for experts to analyse the banking crisis from the consumer perspective, Mr King acknowledged that 'banking is inherently risky', but felt that too much of the risk is being placed on the consumer's shoulders.
Bank sales techniques slammed at Banking Commission hearing
Sir Brian Pitman, chairman of Virgin Bank, picked up Mr King's theme when he questioned the motivation of banks when dealing with their customers. Sir Brian was critical of the way bank customers are greeted when they enter their local branch. He said that inevitably the first people they speak to are sales staff rather than anyone with banking experience.
Sir Brian pointed out that he was invariably asked if he wanted to buy a certain financial product, or if he enquired about one product, staff pointed out the relevant brochure rather than talked him through the product. This, Sir Brian suggested, indicated they did not understand the product.
Sir Brian told the Future of Banking Commission: 'Can you imagine giving incentives to staff for selling loans? It's crazy, but it's happening. And it's unnecessary. Handelsbank in Sweden doesn't pay bonuses, and it's one of the best in the world. If you give people targets you are encouraging them to increase risk.'
Sales staff, not bank staff
Gill Kirk, a former HSBC employee, who gave evidence as a consumer witness, was equally damning about the banks' emphasis on sales over service. Gill said: 'Banks have always encouraged sales, but now the people who are selling them have a lack of banking experience. They are sales staff, not bank staff.'
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