Dianne Hayter on legislating for a behaviour shift across the financial services sector
The Financial Services Bill has three big tests today in the Lords, when yet again the government will seek to pretend that everything that went wrong in the financial crisis was about regulation rather than the behaviour of the Banks. Thus they are setting up a new regulatory regime rather than concentrate on cleaning up the actions of the financial service sector.
Labour’s amendments call for major changes to impact on how banks and insurance companies behave.
First, we want firms and their employees to have a ‘duty of care’ towards their clients – that is, to work in their clients’ best interests. If a saver has a trust-based pension scheme, then the trustees do have fiduciary duties towards that saver. But in a contract-based savings scheme, there is no such statutory requirement to put the saver’s interests first. Ministers have so far resisted this demand, but we are now geared up to push them to a vote.
Second, we want an enforceable Code of Conduct to which all must subscribe. It must cover integrity and ethics, and the need to avoid conflicts of interest. It simply has to be possible to call people to account when things go wrong. To fine the company is not enough. Individuals who have transgressed must not be allowed to continue in the industry. Other professionals (for example, doctors, barristers, solicitors, surveyors, chartered accountants) have such Codes of Conduct, overseen by bodies independent of the practitioners – and monitored for compliance. A Code for banking is well overdue.
Third, I will have the honour of aligning myself with the Archbishop-Designate of Canterbury, the current Bishop of Durham, in an amendment which would require Banks to publish details of their lending to local small and medium-size enterprises, so as to ensure that they use their massive deposits in a way that generates jobs and regeneration.
There are other key amendments – to introduce professional standards into financial services, and to ensure the consumer voice is heard by the new Prudential Regulatory Authority – but we hope the government will accept some of these without us having to fight them all the way. That will be the test of whether Ministers are serious in wanting to restore trust and confidence in financial services by improving standards and behaviour rather than simply creating new regulatory devices.
Baroness Dianne Hayter speaks for Labour on consumer affairs issues in the Lords
Published 12th November 2012