* BoE governor Carney to oversee chairman appointment
* Carney urges all banks operating in UK to participate
* Lambert expects "good number" of overseas banks to join
* Banks must report on culture, practices each year
(Adds industry reaction, further details)
By Matt Scuffham
LONDON, May 19 Bank of England governor Mark
Carney has backed a plan by Britain's biggest banks to set up a
new body to improve standards in an industry rocked by a string
The Banking Standards Review Council (BSRC), funded by but
independent from the banks, is to be set up this year after
banks accepted recommendations from Richard Lambert, a former
director general of the Confederation of British Industry.
Banks are trying to repair their image tarnished by the 2008
financial crisis and scandals including the rigging of benchmark
interest rates, allegations of foreign exchange market rigging
and the mis-selling of loan insurance.
"Rebuilding confidence and trust in the banks is especially
vital in the UK, because of the size of the banking system and
the importance to the economy of London's role as an
international capital market," Lambert said on Monday.
Carney urged all banks that operate in Britain, both
domestic and foreign, to support the initiative.
"We need a financial system that is safe, fair and acts with
integrity. The Bank of England is doing its part to ensure
safety and soundness. Integrity, however, cannot be regulated.
It must come from within," he said.
The council will work with banks to create a new code of
practice for the industry. But Britain's financial regulator
will retain responsible for disciplining banks for wrongdoing.
Britain's biggest six banks - Barclays, HSBC
, Lloyds Banking Group, Royal Bank of Scotland
, Santander UK and Standard Chartered -
and its largest customer-owned bank, Nationwide, asked
Lambert to come up with proposals for the body last year.
The Parliamentary Commission on Banking Standards, a group
looking into ways to reform banks, supported the creation of a
professional standards body in its final report last year but
said it could take a generation for it to become fully
"While this ambitious long-term project gets under way,
wide-ranging reform is needed now on a number of fronts to
secure improvements to standards," the Commission's Chairman
Andrew Tyrie said on Monday.
The BSRC will champion good practice, requiring banks to
commit to improving their culture and to report back on their
performance to the public each year. It will also produce an
annual report highlighting progress made the industry and by
individual banks, and what more needs to be done.
"While it is a step in the right direction, without
effective disciplinary teeth, it may fall short of
expectations," Iain Coke, head of faculty at the ICAEW, an
Clifford Smout, a partner specialising in regulatory
strategy at accounting firm Deloitte, said the body's
credibility would only come as it develops a track record.
"The key challenge will be in embedding new codes of conduct
so that these affect the way that individuals behave throughout
a bank," he said.
Lambert told Reuters he expected a "good number" of the
large international investment banks" operating in London would
support the new body.
Carney will chair a panel of "respected figures" from
outside the industry set up to appoint a chairman of the council
and to ratify the appointment of its chief executive.
"The appointment of the Governor of the Bank of England to
lead the selection process for the new chairman sends a powerful
signal about the clout that the new body will have," its Chief
Executive Anthony Browne said.
Lambert, 69, will serve as interim chairman but ruled
himself out of the running to take the role permanently, saying
he could not commit to the two to three years it will take to
establish the new body and was not sufficiently independent.
The council, which will cost between 7 million and 10
million pounds ($16.83 million) a year to run, will set
standards of good practice that may include whistle-blowing
protocols, processes for handling small businesses in distress,
dealing with conflicts of interest and managing high-frequency
Lambert stopped short of following the example of the Dutch
Banking Association, which this year ordered its 90,000 members
to swear an oath, saying it would not have been credible.
He said the new body was not replicated elsewhere in the
world and had attracted interest from authorities in Australia
($1 = 0.5942 British Pounds)
(Reporting by Matt Scuffham; Editing by John Stonestreet and