When did somebody last say to you Trust me and what was your response? It’s not a bad illustration of the problems facing Britain’s banking sector.
Royal Bank of Scotland, HSBC, JP Morgan, UBS, Citibank and Bank of America Merrill Lynch were recently fined £2.7 billion by the Financial Conduct Authority (FCA) and two other regulators for failing to stop traders from repeatedly rigging foreign currency benchmarks. Barclays is coping with the fallout after admitting that its traders colluded to fix Libor inter-bank interest rates, while The Co-operative Bank is reeling from an over-ambitious takeover and sex and drugs revelations about its former chairman Reverend Paul Flowers.
How do these banks persuade shell-shocked consumers to trust them again? Certainly not by asking them to do so, say communications experts.
‘The person you should trust least is somebody who looks you in the eye and says Trust me,’ explains one bank communications chief. ‘It makes them sound like a second-hand car dealer.’
Shane Mullins, chief executive of independent financial advice firm Fiscal Engineers, tried tackling the issue head-on three years ago when he combined with The Institute of Financial Planning to launch A Question of Trust, a campaign aimed at rebuilding confidence in the financial services industry after the endowments and payment protection insurance mis-selling scandals.
The campaign produced a trust index with Nottingham University to measure engagement with customers, but failed to attract enough backing from major companies.
‘I was trying to get levels of engagement across regulators, stakeholders, industry bodies and different consumer groups,’ he says.
‘But we came up against territorial issues and challenges from people who wanted to be very careful about what they said about trust.’
Scott White, who advised the A Question of Trust campaign and is now head of strategy and communications at insurance group Legal & General, adds: ‘There was a difficulty in getting companies engaged beyond their own business in the wider interests of the financial services community and investors.
‘Shane is very passionate and believes that the industry has to be very direct about it but the industry put up a lot of blockages. It didn’t want to consider something that was right at the base of why anybody would be engaging with the industry in the first place.’
So how can trust be rebuilt? It’s a tricky question for both banks and their regulators.
Take the Bank of England, where Chancellor George Osborne launched the Fair and Effective Markets Review in June. The year-long study has been asked to ‘conduct a comprehensive and forward-looking assessment of the way wholesale financial markets operate, help to restore trust in those markets in the wake of a number of high-profile abuses and influence the international debate on trading practices’.
However, five months after the launch, the Bank’s own conduct came under the spotlight when it emerged that it sacked senior foreign exchange trader Martin Mallett following criticism of him in a report into the scandal and separate conduct breaches that emerged in the investigation.
A Bank of England spokesman declined to speak about the challenges the review expects to find, directing enquiries to a consultation document on its website and the comments by Minouche Shafik, the deputy governor for markets and banking who is leading the review, in a speech at the London School of Economics and a Financial Times interview.
Shafik made waves in the interview by declaring that the scandals buffeting the financial markets were not down to a ‘few bad apples’ and that the authorities are ready to impose more regulation of the sector to regain public trust.
In the speech, she said that some of the positive results of action to reform the financial system had been ‘offset by a long tail of outrageous conduct cases’ that were ‘like salt rubbed into the wounds to public confidence in financial markets’.
Meanwhile, the consultation paper, issued jointly by the Bank, the Treasury and the FCA, broaches the possibility of harsher penalties for those banking staff who breach internal guidelines, tighter electronic surveillance on trading floors and enhanced processes to protect whistleblowers.
It also considers imposing heavier charges on firms that break City regulations and suggests that rules allowing bonuses to be clawed back from bankers in certain situations could be extended to asset managers and trading firms.
Shafik’s comments focus on changing the regulatory framework, rather than any overt customer-focused campaigns or communication work, reflecting a view inside the Bank that rebuilding trust is only part of the review’s scope.
Trust is also not the sole issue in The Co-operative Bank’s response to its troubles. In June, the organisation became the first UK bank to publicly survey customers and staff following the 2008 financial crisis to understand what ethical and value standards they want it to embrace.
The poll, completed by 76,000 people, was one of a regular series of surveys seeking views on the five pillars of the bank’s current ethical framework – human rights, international development, animal welfare, economic and social development and the environment.
However, for the first time it also gauged opinion around three new areas – responsible banking, transparency and treating customers fairly – clearly related to the bank’s recent troubles.
In addition, values and ethics were written into the bank’s constitution for the first time in November last year.
A board committee with an independent chairman has been created to ensure that values and ethics are at the heart of the bank and its latest advertising campaign proclaims that it has turned down £1.2 billion of lending since it became the first UK bank to have an ethical policy in 1992 because it did not meet the policy’s requirements.
Tony Langham, chief executive of the bank’s financial public relations firm Lansons, says the results of the poll will be issued later this year.
‘It’s not specifically about trust. It’s about values and ethics,’ he says. ‘This is to rebuild the reputation of the bank. Clearly what happened had an impact. This is the fight back. It’s fundamental because the appeal is the ethical bank that’s available on the high street, so redefining the ethics and values policy is absolutely core to everything the bank does. Going back on television and advertising, that is the biggest expression we can make of it.’
Langham believes the issue of trust in Britain’s banks is not as one-dimensional as it is sometimes painted.
‘There’s implicit trust in parts of the financial services industry,’ he says. ‘People trust banks to look after their money and when they go to cash machines, they trust that the right amount of money will come out and that the banks will add it up properly.
‘There’s huge trust in some parts of banking. Where there isn’t trust is in the financial services industry generally to act in the customers’ best interests rather than its own.’
How should the banking industry respond? ‘It has to do what it says it does,’ says Langham. ‘If a company says it is here to act in the customer’s best interests, it has to do so.
‘The key thing is authenticity: if you do what you say, people will trust you. But telling people to trust you is not the way to tackle it. You have to change behaviour. Most of the banking industry has accepted that its culture needs to change.’
That’s certainly the view at Barclays, where chief executive Antony Jenkins vowed to change the culture when he was appointed in 2012.
Criticising the banking of the previous two decades as too aggressive, too focused on short-term goals and disconnected from the needs of customers, clients and society, he told the bank’s 150,000 staff in a memo that Barclays had to be a values-driven business and was not the place for employees who did not agree.
Launching Transform, a programme to turn Barclays into an ethical organisation, he wrote: ‘You won’t feel comfortable at Barclays and, to be frank, we won’t feel comfortable with you as colleagues.’
Jenkins has matched his words with action by closing Barclays’ tax planning unit, stopping its dealing in commodities for hedge funds and ending the practice of offering sales incentives to staff in bank branches.
There’s plenty more to do, however, with the bank still in discussions over a co-ordinated settlement with regulators over its own foreign currency market-rigging allegations.
For Barclays’ director of retail and business banking communications Alistair Smith, such actions are vital parts of the efforts to turn around the business.
‘The way you regain trust with people is by demonstrating day-in, day-out in their interactions with you that you are worthy of it,’ he says.
‘How you do your PR or marketing is not trying to rebuild trust. That’s trying to give people some sort of impression of things.
‘The fundamental principle behind Antony Jenkins’ work is that he is engaged in changing the bank. An output of that would be greater trust but actually he’s doing it because it’s what’s needed to make the bank a sustainable success.’