Banking sector must detox, says ICAEW
- Publish date: 07 November 2011
- Archived on: 29 September 2013
7 November 2012
Rehabilitating the toxic reputation of the financial services sector requires radical changes in both culture and business practices, suggests a new report from ICAEW. While regulation is critical, the sector has to demonstrate responsibility by developing its own solutions to market failures, shifting focus from products and profits to service.
A new report entitled Market Failures, Market Solutions, due to be published at an ICAEW conference in London tomorrow, suggests that rebuilding trust will be a challenge for the financial services sector for the next decade. It urges the sector to address its reputation issues to avoid being seen as incapable of acting dutifully, calling for the provision of useful services to customers to take centre stage.
Iain Coke, Head of ICAEW’s Financial Services Faculty, said: “The financial services sector has to get onto the front foot and deal with the challenges it is facing, rather than wait for regulators and authorities to tackle the problems. If the sector acts defensively, the public will interpret this as trying to avoid its obligations, which will be like pouring fuel on the reputational bonfire.
“The public can understand and forgive honest mistakes, but only if the sector acknowledges and deals with problems quickly and responsibly.”
The paper summarises various ways in which financial markets currently appear to be failing, and proposes some practical measures that the financial services sector can take to address the problems:
- Focus on providing services that support the economy rather than selling products or short-term profits
- Take a constructive approach to dealing with regulators and consumers
- Place more emphasis on preventing avoidable failures and improve the way it reacts when problems occur
- Establish professional communities that set standards for behaviour and that can apply sanctions to both individuals and firms
- Change business structures so that they promote integrity
- Invest in staff training to ensure they understand not only their own areas of specialism but wider concepts to better understand risk and reduce dangers of mis-selling
- Improve the way products and services are described and offered, and help promote financial literacy more broadly.
The Market Failures, Market Solutions report is part of ICAEW Financial Services Faculty’s thought leadership programme Inspiring Confidence in Financial Services, and can be downloaded from: www.icaew.com/fsf.
Contact Kirstina Reitan, ICAEW press office, on +44 (0)207 930 8607 or email Kirstina.firstname.lastname@example.org