Banking: Standards and Reform

Baroness Coussins Excerpts

Tuesday 3rd September 2019 Lords Chamber

[Baroness Coussins (CB)]

My Lords, I too thank the right reverend Prelate the Bishop of St Albans and congratulate him on securing this debate. I declare my interest as president of the Money Advice Trust—the charity that runs National Debtline and Business Debtline, which between them help hundreds of thousands of people a year to tackle their debt problems.

We last debated this subject three years ago—almost to the day, I think—and it is right that we return periodically to the parliamentary commission’s work and measure the progress that has been made against its recommendations. Most of these recommendations focused on issues of governance, professional standards, structure and regulation. Nevertheless, now, as then, I believe that it is also important to make the point that no debate on banking standards can be complete without reference to the individual consumer and the need to protect the consumer interest. There are two broad aspects to that: first, ensuring that consumers are able to access financial services and, secondly, ensuring that they are treated fairly when they do, no matter what their personal circumstances are. I should like to say a few words on each of those two aspects.

The first is access to services and, more broadly, improving financial inclusion. The parliamentary commission focused its recommendations in this area on the issue of basic bank accounts and was influential in their introduction in 2016, since when they have certainly made a difference. However, challenges remain in ensuring that they fulfil their full potential as a tool to address financial exclusion. For example, it is widely acknowledged that awareness of basic bank accounts among the people whom they are intended to benefit is not high enough. I believe that the banking industry could and should do more to promote basic bank accounts to financially excluded groups. The new Money and Pensions Service should surely have an important role to play here too, and I wonder whether the Minister, whom I welcome to his new role, will comment on that when he replies.

Another challenge concerns the identification requirements for opening a basic bank account. These of course are understandable, given the need to protect against fraud, but they have the unintended consequence of presenting a barrier for people who do not have certain means of identification, such as a passport or driving licence. Alternatives can be used, such as letters from government departments, but the option to use these is not well understood and is another area that should be addressed.

Nevertheless, fortunately, the broader financial inclusion agenda has risen in prominence significantly since our last debate three years ago, thanks in very large part to the work of the noble Baroness, Lady Tyler of Enfield, and her colleagues on the House of Lords Financial Exclusion Committee. Their report was influential in the establishment of the Financial Inclusion Policy Forum, which brings together different government departments to examine these issues and now also includes some key external members—among them, I am pleased to say, Joanna Elson, the chief executive of the Money Advice Trust. But we remain some way off the tangible, comprehensive and joined-up approach to financial inclusion across government that is required. Does the Minister agree with that and if so, what plans do Her Majesty’s Government have to improve the situation?

My second main point is on the need to ensure that customers are treated fairly when they access banking services, no matter what their personal circumstances. This is essential if we are to rebuild trust in the banking industry. In our debate three years ago, I noted the significant progress that had by then been made in improving the treatment of people in vulnerable circumstances; I am pleased to say that this has continued in the period since.

The Financial Conduct Authority’s proposed new vulnerability guidance, which is currently out for consultation, is a welcome sign that the regulator is continuing to apply pressure on banks and other financial services firms to improve. There are signs that this continued pressure is delivering results across the industry. The Money Advice Trust has now worked with more than 220 firms and trained more than 19,000 frontline staff to help them identify and support vulnerable customers. The trust has also recently partnered with UK Finance to run a vulnerability academy for senior policymakers in banks and other financial services firms. These are sure signs of the industry’s progress. Discussions within the industry are focused increasingly on product design; that is, making sure that banking products and services are being designed in the first place with the needs and circumstances of vulnerable customers in mind. This is a welcome and critically important development, which needs to be pursued vigorously.

In conclusion, while the work of the parliamentary commission largely focused on the macro level—that is, structural problems it observed in the sector—we must never lose sight of the consumer in our debates on how this industry’s essential services are provided.