'Changing the relationships between banks and customers will take a lot more than slick PR'

The Central Bank’s report into bank culture is a start – but much more needs to be done.

By Dermot Ryan General secretary, Financial Services Union

LAST WEEK, THE Central Bank published a report on culture in Irish banking. It could have benefited from some pictures.

In particular, that one of Father Dougal Maguire getting to grips with the difference between dreams and reality springs to mind. There is a chasm between how banks portray themselves to us and how they often treat customers, and indeed staff.

Banks tell us they are our trusty partner on life’s journey – backing us, supporting us, celebrating with us. However, really changing the relationship between our banks and the customers and communities they serve takes a lot more than slick PR.

One of the things that must change is the culture within the banks. In that regard the Central Bank report is a welcome first step in what may prove to be a long, difficult – but worthwhile – journey.

The report made a number of important findings about the sector in general, including:

  • A weakness in reaching a collective understanding of what consumer focus actually means and what that requires in terms of how banks operate;
  • That the leadership teams of some banks still display short-term ‘firefighting behaviour’ probably a remnant of the crisis-era mindset;
  • Decision-making is often concentrated at the highest levels, with senior staff not having the power to decide on operational matters;
  • A lack of diversity and inclusion at the senior levels within banks – a failing that can contribute to group-think.

The report also charts a series of actions to support significant change in the culture in banks. For example, each bank is now required to devise an action plan to address individual issues highlighted by the Central Bank.

Importantly, the Central Bank is also proposing a new ‘individual accountability framework’ which would, among other things, ensure clear lines of accountability within firms.

So perhaps no more excuses along the ‘systems failure’ line when things go badly wrong in banking.

Insular thinking

We believe that for too long staff and customers have paid the price for the short-term, insular thinking that has dominated the top levels of banking in Ireland. This has to change and this report could well be the catalyst for that change.

The timing is also important. I firmly believe that the tracker mortgage scandal may prove to be a watershed moment for the sector.

This public scrutiny has, in no small part, resulted in a volte-face by the banks in how they dealt with the 37,800 customers they failed. By mid-June this year more than €550 million had been received by customers in redress and compensation.

I believe the banks should now grasp the opportunity to draw a line under the culture that allowed this situation fester.

We are anxious to engage with the Central Bank and others in changing the culture in the sector. We are also adamant that, to be meaningful, any change in culture has to have tangible benefits to customers, staff and the communities they serve.

For example we want to see the sector commit to providing access to financial services and to experienced, expert staff in communities throughout Ireland.

In recent years rural Ireland in particular has borne the brunt of reductions in bank branches and services. In Ireland closing a bank branch can be done at the whim of institution.

Other countries require banks to produce impact assessments and consider alternative options before branches can close. This is particularly important when a town has only one financial institution remaining.

Agreeing to such a framework would demonstrate that banks are actually giving priority to customers.

We also want to see the sector value its staff. Into the future, technology and digitalisation will play a larger role in how consumers interact with banks.

It is important that current staff are provided with the skills and training to adapt to that change, and ensure the wealth of customer experience they have accumulated is still a core part of how the bank deals with customers.

Community standards

We place significant regulatory standards on banks. Is it not time to also consider setting standards of a similar weight in relation to other areas of operation such as customer service, supporting sustainable communities and career progression for staff?

A radically changed culture is not an end in itself. Ultimately it must deliver a banking system that serves a sustainable economy and society. As well as achieving profit, financial institutions should be required to meet ‘community standards’.

These could include standards of access to financial services, particularly in rural areas, ending the trending towards outsourcing of core banking functions and provide rewarding careers for staff – including new entry routes through apprenticeships, for example.

We need to think more creatively about the type of banking system and banking culture we want into the future. Banking in Ireland has emerged from a 10-year crisis. However, just because banks are profitable again does not mean that all is well.

The tracker mortgage scandal demonstrated that something is very wrong at the heart of banking. It can and it must change.

Dermot Ryan is general secretary of the Financial Services Union.

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