The chief executive of Lloyds has warned his peers that banks will only rebuild public trust when they start treating customers properly.
In an abrasive speech delivered to the banking industry, António Horta- Osório told competitors to stop moaning about incoming rules to make banks safer and said the industry must “face up to our previous failings and apologise for legacy issues where we need to”. He added: “The sector can never again go back to not putting the customer at the heart of their business. It must never again sell products that customers do not need or not having the correct values or ethics.”
Those issues have included scandals that have hurt customers, such as payment protection insurance mis-selling, and the manipulation of markets for individual bankers’ gain, such as Libor and foreign exchange rigging.
The Lloyds boss said the “regulation burden will only stop growing once the public and regulators trust us to manage our sector in a responsible manner”.
He mounted a defence of ring-fencing rules that mean banks will have to separate high street lending operations and provide extra capital and a dedicated management team from 2019, with the expectation that the additional safeguards will mean the divisions are less likely to fail.
In response to the ring-fencing proposals in 2011 by Sir John Vickers’s Independent Commission on Banking, Lloyds started to structure itself to conform with the rules, Mr Horta- Osório said. In a veiled attack on the likes of HSBC, he added that other banks did not make changes and are fighting the rules. “Others thought they would make it not happen,” he said.
The comments, made to the British Bankers’ Association’s conference, may stir controversy as Lloyds may be the only big bank to win a waiver to avoid the regulations because it has almost no business that would sit outside the ring-fence, making it unlikely that it will be forced to set up the structure.
The Lloyds boss may also spark criticism because the bank has the largest exposure to PPI mis-selling, with a £12 billion compensation bill and two regulatory enforcement fines for badly handling customer complaints. Mr Horta-Osório took an 11 per cent cut from his £3.2 million in annual bonuses for 2012 and 2013 in response to a £117 million fine by the Financial Conduct Authority this month.
As big banks face the scrutiny of the Competition and Markets Authority, he attempted to throw the spotlight on Royal Bank of Scotland — the biggest player in business banking — saying there was plenty of competition in retail banking, but not for small businesses. “I think we should focus on expanding improvements . . . to the small business sector,” he said.
John Griffith-Jones, chairman of the FCA, said that he thought retail banks had “really got it” and were now putting customers first. However, he added that attempts by the industry to have the ring-fencing rules scrapped were futile, as they “are pretty much set”. He acknowledged that industry lobbying would continue.
On the impending sale of shares in RBS, Justin Bisseker, a banking analyst at Schroders, which is one of the biggest three shareholders in it, said that the government was sensible not to hold on to the shares indefinitely. “Looking forward, RBS will be an extremely well-capitalised bank and I think that process of sell-down will increase liquidity in the shares,” he said.