U.K. Banks Should Be Judged Against Promises, HSBC’s Flint Says

U.K. banks should have their behavior independently reviewed and judged against their own promises to regain trust in the industry, HSBC Holdings Plc (HSBA) Chairman Douglas Flint said yesterday.

“There has to be a risk of being debarred from the industry and prosecuted if people have gone way over the line, but it has to be somewhat exceptional,” he said on the sidelines of the British Bankers’ Association conference in London yesterday. “If you put a sense of foreboding or fear into the vast majority of people who work in these organizations, you build in risk aversion.”

The BBA has put together a group to examine whether a board could be created to monitor and uphold standards in banking. The new organization could have a register of workers who could be barred for breaking rules, according to the lobby group Chief Executive Officer Anthony Browne. The plan comes after banks have put aside at least 9 billion pounds ($14.5 billion) to redress customers mis-sold loan insurance and interest-rate swaps.

An independent company could be hired to judge a firm against its own values and publish a report to its board, regulators or the public, with “public embarrassment” a deterrent, Flint said.

Not Illegal

Bankers would be censured for conduct that is damaging, even if it is not illegal, Flint said. He cited the Worshipful Company of International Bankers’ principles for good business conduct, published in 2004, as an example of how the rules could be constructed.

The U.K.’s Financial Services Authority can withdraw permission for people to hold management positions in the financial industry if they are found not to be “fit and proper.”

The BBA’s Browne said yesterday a banking standards board would have to consider how it would function in unison with the FSA, how it would be funded and whether it could have some legal powers similar to that of the U.K.’s General Medical Council, which can bar doctors from practicing.

The withdrawal of FSA approval is “pretty rare” and “tends to be black or white,” said Flint. “There needs to be a more principled nuance on the behavior that’s expected.”

-- Editors: Jon Menon, Steve Bailey

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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