Banking overhaul "depends on will"
Filed under: Scams & Fraud
Professor Bob Garratt, a corporate governance lecturer, believes there should be a comprehensive review into the scandal, but doubts political leaders will implement one.
Bank of England Governor Sir Mervyn King said there needed to be a "real change in culture" but stopped short of calling for a Leveson-style inquiry.
Asked if he thought a belt and braces inquiry was necessary, the visiting professor at Cass Business School in London said: "There is a need, but it's hugely controversial.
"That depends on the political will. But I don't think either David Cameron or the Chancellor have any political will. They are trying to defend the City of London, particularly against Europe."
Prof Garratt agreed with Sir Mervyn that a radical change in the banking sector was needed, and the investment side of the industry should mirror the high street banking model. "It certainly can change," he said.
The academic said the current crisis can learn from the policies of the late Lloyds chief executive Brian Pitman, who led a turnaround at the bank in the 1980s. "He was dead straight, and actually started a culture which took Lloyds to the top of British banking," he said. "So it can be done."
Explaining Pitman's ideas, he said: "Banking is very simple. In retail banking you need to know everyone who is looking for money, and never quite lend them as much as they want, and then watch them like hawks so you're always aware of what they are doing.
"Investment banking is also simple, really, if you only trade for your clients. Never trade for yourself. That way you keep out of most trouble."
Prof Garratt said it would take a number of years for the culture to change from top to bottom, but if new rules were put in place, change could be noticed within months.
"We know that deep culture comes from intended change. We can make intended change in a matter of months, but the deep culture takes a good few years. It can be overhauled."
The fundameatal culture needs to move from the toxic definition of recent years, that "investment culture is what we do when regulators aren't looking", Prof Garratt said.
Asked how the banking industry should be regulated, the expert said a structure involving the Financial Services Authority (FSA), the consumer regulator and the Bank of England was required, and they need to be strong and effective.
He said: "The regulatory system has not been very good but it is getting better. The good thing is that they (regulations) are getting put in place."