Is the finance sector’s reputation damaged beyond repair?

Whether or not the reputation of the finance sector is damaged beyond repair depends on the steps taken to establish a robust and honest framework within which it operates. The immediate focus of the financial crisis has quite rightly been on saving the financial system overall, focusing on the wholesale market and inter-bank lending. However as that area stabilises the responsible sale of financial products to the consumer will surely take centre stage.

What is perhaps surprising to learn is that the UK has developed an excellent framework for the responsible sale of retail financial products.  This is the Treating Customers Fairly (TCF) framework that the FSA is half-heartedly putting into place. It has features that we all professed to support; light touch, principles-based, easy to understand, allowing banks and insurance providers to innovate and sell, while providing consumers with apparently solid protection.

So why hasn’t it worked? The answer is the way in which it is being implemented. Banks and insurance companies are required to build up data that ‘proves’ to the FSA that their behaviour is fair. However a skin-deep scratch by a moderately intelligent consumer, not to mention the current crisis with all its toxic loans bad debts, will tell you that the TCF principles are regularly being flouted.

The principle reason for this is that the quantitative data being used to demonstrate fairness cannot equate to a qualitative measure of what fairness is.  Just as company accounts require an independent judgement that accounts are a ‘true and fair view’ of the state of the company’s finances, TCF needs an independent audit system to verify that the complex data provided does, in fact, demonstrate that banks and other financial institutions are selling products fairly.

This type of system could save the sector a small fortune currently being spent collecting unnecessary data. It might also provide the clear guidance that many in the sector feel they currently lack. Most importantly it might provide consumers with some much needed, robust protection. If we cannot develop such a system then we risk re-building a house of cards with the same flimsy foundations.


Posted: January 2012

Notes to Editors:

1. Leo Martin is available for interviews, briefings or written comment

2. GoodCorporation is a leading adviser in the field of business ethics, specialising in the assessment of responsible business management and anti-corruption practices.

Media Enquiries:

Sally McGeachie 020 8877 5300 or