LONDON (Reuters) - Britain’s banks are on the way to delivering a more “socially useful” banking system after becoming a focus for public anger in the financial crisis, the Bank of England’s director of financial stability said on Monday.
Andrew Haldane told a meeting organised by Occupy, the campaign group seeking to reform finance and end social inequality, that it had played a key role in changing attitudes.
“I want to argue that we are in the early throes of such a financial reformation,” Haldane told the event in London.
Key reforms, such as changing banking culture, forcing lenders to hold more capital, more competition and reining in big bonuses were starting to have an effect.
It is important to punish negligence and criminality and this is being done, he said. Barclays has admitted manipulating a key interest rate — a key “turning point” — and several lenders are collectively paying 10 billion pounds in compensation for mis-selling loan insurance.
“A number (of reforms) lack the pizzazz of a ‘tar and feathers’ strategy. But taken together, I think they amount to the most radical agenda of financial reform for 80 years. Importantly, I also think they will work,” Haldane said.
Richard Paton of Occupy, which set up camp outside London’s St Paul’s Cathedral from October 2011 to February this year, said a gap existed between what Haldane was saying and what political leaders were prepared to accept or talk about.
There was loud applause from several hundred people when one speaker said banks remained “untouchable” for politicians.
The new heads of the UK’s biggest banks have committed to restoring trust in their institutions and improving their social usefulness, Haldane told the event held in Friends House, the London Quaker Society building.
“And those words are beginning to turn into actions. Barclays and today Lloyds are seeking to change their sales-oriented culture, returning to their Quaker roots. There is the quiet, but unmistakable, sound of a leaf being turned.
“Occupy’s voice has been both loud and persuasive and ... policymakers have listened and are acting in ways which will close those fault-lines,” Haldane added.
But he urged caution about “shredding” the banking model. There are 400,000 people employed in banking in Britain and the vast majority were not driven by greed and were not negligent, he said.
“Nor, even in the go-go years, were they trousering skyscraper salaries. It is unfair, as well as inaccurate, to heap the blame on them.”
The Bank of England becomes the main regulator for banks from April 2013 and Haldane also sits on the Bank’s Financial Policy Committee which sets the tone for UK regulation.
He said competition in banking would be boosted with a shared utility that stored everyone’s details and into which existing lenders and new entrants could “plug and play”, making it much easier to switch banks.
He also highlighted Sweden’s Handelsbanken, now the fastest growing lender in Britain, opening a branch every two weeks to offer basic banking services.
Occupy’s Paton doubted competition would end the “toxic business models” of banks. “I wonder if nationalising the clearing system would help by making smaller banks less beholden to bigger banks,” he said.
Asked whether Britain should join 11 euro zone countries planning to tax financial transactions, Haldane said other ways of stopping ultrafast high-frequency traders from undermining financial stability were also being used in Europe.
The risk of banks leaving Britain to escape tougher rules was “overblown”, Haldane added.
Reporting by Huw Jones; Editing by Toby Chopra and Robert Woodward