A new report has revealed a cultural change in banks may take a generation, with the cost of poor culture far exceeding previous estimates.
British retail banks and building societies have paid out at least £38.5 billion in fines and redress for customers over the last 15 years, with at least £27 billion of that due to the mis-selling of PPI. Poor culture also resulted in poor customer service, with banks have receiving 20.8 million complaints between 2008 and the first half of 2014, and 25 million between 2006 and the first half of 2014. The number of complaints to the Financial Ombudsman has increased more than fivefold from 75,000 in 2008/09 to 400,000 in 2013/14.
The report, from the think tank New City Agenda (recently founded by Lord McFall, the Rt Hon David Davis MP and Lord Sharkey) and Cass Business School, also found aggressive sales cultures may take a generation to fix after taking hold in retail banking over the past two decades. It found staff in some branches received cash bonuses, ipods or tickets to Wimbledon for hitting ambitious sales targets, whilst those that failed to do so were humiliated by having cabbages and other vegetables placed on their desks.
But it’s not all doom and gloom. Banks seem to have acknowledged the toxicity of the aggressive sales culture and have put in place large-scale culture-change initiatives. However, when it comes to culture the smaller banks are out in front.
The Most Reverend and Right Honourable Justin Welby Archbishop of Canterbury (New City Agenda Advisory Board Member) said: “New City Agenda’s Culture of Banking report is a timely and important piece of work that puts culture change front and centre of the agenda for reforming our banking system.
“It is clear that much more needs to be done by all stakeholders for trust to be restored in our financial institutions, and this report sets out clearly how banks are trying to do this and where improvements clearly still need to be made. The huge fines levied on a number of major banks on 12th November 2014 illustrate the length of the journey of culture change that still needs to be travelled.”
The report has produced recommendations to address practices that have become part of the banking culture, the foremost being that banks must ensure that culture change remains a top priority given that the big banks can’t afford a repeat of past scandals, nor can customers or the wider British economy. The Banking Standards Review Council should survey frontline staff to make sure such pressure does not exist, the report added, and its annual reports on standards should be presented to the Treasury Select Committee.