If the banking sector is to restore confidence and trust it must have “strong, effective and well-informed” management and governance, not just financial resilience, according to the Bank of England (BoE).
The comments come after eight high street banks underwent a stress test to assess how well they would cope if there were another financial crisis. The Co-operative Bank was the only one to fail the test, whilst Lloyds Banking Group and the Royal Bank of Scotland barely made it through.
Minutes from a Financial Policy Committee (FPC) meeting earlier this month state, “Committee members also noted that recent misconduct and other operational failing had highlighted that rebuilding confidence in the banking system would require more than financial resilience.
“Changes to banks’ business models in response to commercial and regulatory developments were expected to challenge management capacity over the next few years. In this environment, the Committee judged that strong, effective and well-informed management and governance would be essential to rebuild confidence in the banking system.”
Investigations into banking operations, such as bankers being accused of manipulating benchmarks, have led to negative new stories this year. Additionally, many banks have faced criticism in terms of security, customer service and transparency.
Consumer trust in the UK banking sector has been an issue since the financial crisis. Whilst a survey from EY, published in March, showed that after years of decline, trust had stabilised, the UK still lags behind the rest of the world. Some 15% of UK participants said they had minimal or no trust in their main finance provider, double the levels seen in Germany, France and the UK. One of the main drivers behind this was cited as recent news articles.
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