Independent Commission on Banking

Lord Sawyer Excerpts

Thursday 15th September 2011 Lords Chamber

[Lord Sawyer]

My Lords, I, too, thank the noble Lord, Lord Myners, for initiating the debate. It is always a pleasure to witness him in full flight on this issue, as it is to reflect on the contributions of other noble Lords who have expertise in this field. My life experience has been elsewhere and I have a limited knowledge of the university of banks and their various ways, but my interest in banks and financial services in general stems from the fact that these organisations are extremely powerful. They work in very complex and difficult ways, often unseen and unknown by their customers, and have a dramatic effect on the lives of ordinary people. That is why I intended to intervene in this debate. I want to explore what benefits, advantages and opportunities the commission on banking might hold for customers. That is what I am particularly interested in.

What does the lay person, the customer of a bank, make of the recommendations? Certainly, the ability to switch accounts more easily should be welcomed, although we have heard little of that today. We, the customers, do not want to travel in the direction of the energy industry with the ridiculously high level of cold calling that goes on to persuade people to change their providers. We hope that the Government will look carefully at the recommendations on switching.

If the retail ring fence can make retail customers’ deposits more secure and avoid the anxiety in people’s minds, it can also be viewed in a positive light. There are lots of arguments both ways around costs, viability and stability of the ring fence, but the general impression, the general consensus, and certainly what we have heard from the Government and the Opposition is that the principles are right and that we should see a programme for implementation.

There is still widespread disillusion with banks and the banking system. If these proposals do more than put in place technical mechanisms for the management of deposits, the customers need to be taken on board in a big way. I hope that if the Government decide to take this report forward, they will engage with ordinary people and customers to say what the advantages will be. At present, it is two cheers as far as customers are concerned.

The timetable seems rather long to me but I assume that in time, inside the ring fence, customers’ deposits will be safer and free from the financial speculation and exotica that scurry around the commercial banking system. I also assume that within the ring fence there will be a dedicated board of directors and perhaps different forms of governance than we have seen before that would give confidence that the banks do not wildly speculate with their deposits. This is what I should like the Government to consider.

In this period of careful implementation, which we have heard about, I should like the Government to press upon the banking leaders the importance of re-establishing trust with their customers. That can be done basically in two ways. First, they should talk to the banks about the possibility of including customer representation on the boards of the retail banks, along with the usual FSA-approved people whom I accept absolutely are necessary. Can we really have a serious conversation about having different sorts of people on the banking boards, including those with experience outside banking and who might bring a common sense to deliberations that has been absent in the past?

Secondly, there is a huge gap between the boards of banks and their customers. No matter who is on the board, the gap between the board and the customers is enormous. Banks try to bridge this gap with customer service, focus groups and other devices that are more about marketing and not at all about customer engagement. I should like the Government to open a conversation with the banks and to ask them seriously, as a result of this report and the possibility of the ring fence, and all that might happen there, what they can seriously do to engage customers more effectively in their work. I also believe—this is a really important point—that proper customer engagement can affect the behaviour of the banks. The problem in the past has been that top bankers have never had to talk to ordinary customers. If they have to engage with such customers, they just might see the world in a different way. It is important that the Government, who are our representative in these negotiations, take those points on board.

The world’s most ethical bank is the British Co-operative Bank. The behaviour of this bank is determined and shaped by the members on the board, 50 per cent of whom are not bankers, which is not a bad achievement for a bank. There are other institutions inside the Co-operative Bank which you do not find in other high street banks. It has a customer council that engages random customers in a dialogue with a top leader of the bank in order to determine how the bank should behave. I am not saying that every bank has to be a co-op bank, and I fully understand and accept that banks have a responsibility to their shareholders, but they also have a responsibility to their stakeholders, their customers and their employees. I am saying strongly that with 10 years’ experience of chairing a customer council within a bank and building society, the Vickers report implementation provides us with a new opportunity to open up a conversation with banks. Within the ring fence, I ask my friends in the banks what they can do to gain the trust of their customers once again. Can that be a bad thing? I do not think so. What can the banks do to engage customers and employees more effectively?

I know some of the answers but the answers have to be with the banks and not with me. All of us in this House will accept that customer engagement that brings the customers and the banks more closely together is a good thing. We would all support it. Let us work out a plan of how it might be done and let us see that the Government are on the side of the voters. I wait to hear.