The picture in 2010 was rather different: politicians, policy shapers and other opinion leaders spontaneously identified re-capitalisation, regulation and restoring public trust as the biggest issues facing the banking sector. They focused on stricter regulation and more stringent capital requirements to protect consumers and reform an industry that had become perilously unstable. Today most would agree that strengthened capital positions provide a degree of protection against further financial crises and increased regulation makes banking failures less likely.
Only restoring public trust and confidence in the banking sector poses the same level of concern as it did in 2010. As one NGO focused on the banking sector says, “Whilst some positive steps are being taken, it feels like the industry is never very far away from another scandal. The credibility of the sector has been damaged considerably over the last seven or eight years and I don’t think that trust is very close to being restored.”
On the issue of restoring trust, opinion leaders are clear. Banks are not demonstrating how they benefit the economy and society and they do not behave responsibly towards customers. In addition, they believe that the banking sector has taken its ‘foot off the gas’ in its efforts to rebuild trust with consumers.
While politicians, policy shapers and opinion leaders are unhappy with the public’s distrust of banks, they don’t see it as their responsibility. Having stabilised the banking market, they want banks to face up to the challenge of re-establishing trust with a sceptical public who feel betrayed.
The problem is that major banks have little incentive to re-establish trust with customers in a market where, according to the Competition and Markets Authority (CMA), only 3% of customers switch their current accounts despite widespread cynicism with banks. Market inertia also limits the impact of small scale ‘challenger banks’, which have made little progress in the past five years.
Though many are disappointed that the initial findings of the CMA’s enquiry into competition in the UK banking sector falls short of recommending a break-up of big banks, the CMA correctly points out that the mechanism for driving change in the sector is already in place. The Current Account Switching Service makes switching a relatively painless process and recommendations to improve the Midata comparison site, which helps consumers to identify the best account for their individual circumstances, provides consumers with the tools they need to drive competition.
The problem, as BBC journalist, Anthony Reuben, says, is that when it comes to banking, ‘consumer websites and switching services urge us to take the time to do things to save money, but we don’t, because we haven’t got time, we don’t want to learn new passwords, we’re daunted by the process, we’re worried it will go wrong and, let’s be honest, we just can’t be bothered.’ As a result, we face years of waiting for change that isn’t coming.
If we really want a better banking system, perhaps it’s time for us to be bothered.