Anthony Browne on restoring banks’ reputations | British Bankers’ Association | Video

Transcript

Anthony Browne is the man tasked with cleaning up British banks. He explains what has been achieved in reforming the UK’s banking sector since the financial crisis and the Libor scandal, and what’s next in terms of embracing Islamic finance at a national level, supporting SMEs, and growing the economy.

World Finance: A tall order, so, over a year on and what do you think you’ve achieved?

Anthony Browne: Well it’s been an interesting year, both for the BBA and for the industry as a whole. A difficult year in many ways, but I do think we end it in a far better position than we started it. The beginning of this year was just after the wake of the Libor scandal, which caused a complete political storm.

The government set up the parliamentary commission on banking standards, which was like a public enquiry for the industry, investigating everything. We’re now at the tail end of that, Libor is largely restored, and I think confidence in the industry is being restored as well.

It’s helped by economic recovery. It’s helped by the fact that one of the publicly-owned banks is being returned to the private sector. Taxpayers are getting their money back. And it’s also helped by the fact that there’s real recognition that banks are reforming themselves, and doing the sort of things that the rest of the country want them to do. Putting the customer at the centre of what they do, and helping promote economic growth.

World Finance: Since 2008, banks have been widely criticised, and public sentiment has been at rock bottom. So do you think all this criticism was justified?

We need to make sure, in the wake of the crisis, that the regulation is right, that banks’ business models are right, that such a financial crisis can never happen again

Anthony Browne: Well I’m sure a lot of criticism wasn’t justified, but I’m also sure a lot of the criticism was justified. I mean, clearly the banks – or many of the banks, certainly not all of them, but some of them – completely lost the plot. On a number of different fronts.

I mean, clearly there was a major global financial crisis. Banks weren’t the only ones responsible, but they were definitely part of that. We need to make sure, in the wake of the crisis, that the regulation is right, that banks’ business models are right, that such a financial crisis can never happen again.

Banks also – some of them, not all of them – lost sight of their customer. We’ve had a lot of mis-selling scandals. PPI is the most high-profile one, but there’ve been others. And the industry as a whole needs to make sure that it’s more customer-focused, that the number of complaints come down. They are coming down now, latest figures are down 20 percent, year on year. And if the banks can restore their stability, and make sure that the crisis doesn’t happen again. If they put the customer back at the centre of what they do, and they can help play their role of promoting economic growth, then I’m sure confidence in the industry will be restored.

But there was a lot that was wrong in the industry; it’s now being put right.

World Finance: Banking standards have led to widespread reform; how are banks coping with these restrictions?

Anthony Browne: What the banks need now is a period of stability. There has been a huge number of reforms since 2007, implementing the G20 agenda, which is under the Financial Stability Board, a whole series of reforms to make sure that the crisis doesn’t happen again. On top of that there have been national reforms, both in the UK – we’ve got things like the ring-fencing of the retail banks from the wholesale banks, which we support. There’s a whole load of other reforms coming through in the UK through the parliamentary commission on banking standards, things like criminal sanctions for reckless banking.

What we need now, after these various different reforms, is a period of stability. So we can let the reforms bed down, so the banks can fully implement them, and then in a couple of years’ time, it can review them and say, well, what else needs doing? Is there anything else that needs doing, or have we now fixed the system?

World Finance: How important is a successful banking industry for the UK economy?

Having a healthy banking sector is essential for a healthy economy

Anthony Browne: Incredibly important. It’s not just that banks are – you can argue about the precise figure, but roughly 10 percent of GDP. They are the UK’s biggest export industry. It isn’t just serving the UK economy, it’s also serving the global economy.

The banks are also incredibly important for serving the rest of the wider UK economy, from SME lending, which is the subject of a big political debate; but also servicing the mid-sized companies, the big corporate companies, doing, if they want to raise money to invest, if they want to pay for mergers with other companies oversize, when they want to issue bonds, raise money. All banks do all that, and having a healthy banking sector is essential for a healthy economy.

World Finance: We’ve been hearing an awful lot about Islamic finance, so do you think the UK should sit up and listen?

Anthony Browne: Well absolutely, and indeed, I think a lot of them are. I think pretty much all the UK banks have got departments that deal with Islamic finance, as well as the international banks that are based in London.

It is a growing area, I mean it’s clearly not the biggest sector, but there is a lot of interest in it, because people realise the demand that there is for it. London as a global financial centre doesn’t just serve the non-Islamic countries, it also serves Islamic countries, Islamic governments, companies based in Islamic countries, and they have demands for certain types of finance.

Recently, just last week, the government announced it was doing the first sukuk, which is a bond which is compliant with Islamic finance. There are discussions with the Bank of England about making sure that its processes and the services that it offers are also compliant with Islamic finance, so that Islamic banks can then use the bank and interact with the Bank of England in the way that non-Islamic banks can.

World Finance: And finally, looking to the future now. What do you think are the biggest challenges facing the UK banking industry?

Anthony Browne: The biggest challenge for the industry now is to restore trust and confidence, to rehabilitate itself in the eyes of the customers, in the eyes of politicians, in the eyes of international regulators, and really get back on the front foot again.

Clearly, major financial crisis, major reforms needed; those reforms have been happening, the banks have also been changed in the way they work internally, and we now need to get back to a period of normality, as it were, with all those reforms in place, the changes in place, so that the banks can play the role that people want them to play, which is helping customers, helping businesses, and promoting economic growth.