The banking model is fatally flawed. It’s time to break up the universal banks, separate the cavalier commercial arm from the retail element, and educate the new generation of retail bankers.
For a long time, it has been clear to financial experts around the world that the universal banking model is fatally flawed. By universal banking, we mean the practices of financial institutions that operate a one-stop shop encompassing the commercial side of things, such as investment banking, along with the retail elements of a bank, such as the everyday branch and its related services that regular consumers would be more familiar with.
There were many contributing factors to the financial crisis of 2008, but the reckless selling behaviour from the investment arms of some of the world’s universal banks deserves a lot of the blame. As the financial world scrambles to get back on its feet, government-sponsored bailouts feed into the coffers of these ‘weakened’ institutions that have convinced the world that without their immediate recapitalisation, dire consequences would soon follow.
The remaining banks struggle to fight off the threat of total nationalisation resulting from their risky investment and mortgage lending practices. These institutions are ‘forced’ to introduce higher fees on day-to-day banking services which will ultimately push a higher burden onto the everyday customer.
It would appear that now, at a time when people all over the world face rising taxes and other austerity measures while desperately attempting to meet personal financial obligations, some of the biggest banking institutions do not have the customers’ best interests at heart.
But it’s not the just the customers that are receiving the cold shoulder from the big players in the financial community. As the bonuses continue to escalate for the executive members, large quantities of the organisations’ lower tiers faces the axe.
Governments are slowly coming around to the idea that banks should listen to them, especially in the cases when it owns a financial stake.
Every day the financial press bombards their readers with further discussion on Vickers and Liikanen, offering an outlet to ‘talk about talking’ with little hope for rapid progress.
Implementing changes to regulation that has the potential to govern risky banking practices takes time. However, even with this sober realisation in mind we are still seeing some positive signs of banks being held accountable for their actions. Retail bankers are being told that they must act in clients’ interests rather than push products. Fines and compensation orders for mis-selling and disciplinary action and naming and shaming over the LIBOR rate-rigging scandal all convey the message that the grassroots of a retail banking revolution is in currently in the making.
Evidently there is a vital need for retail bankers to be educated to a similar standard as other professions such as the law and accountancy.
One organisation that has already recognised this gap in education standards is the International Academy of Retail Banking (IARB).
The Academy aims to be recognised as the premier educational and professional body for retail banking worldwide. It is committed to making the Certified
International Retail Banker qualification (CIRB) the recognised standard for professional retail bankers worldwide.
The IARB is a part of the Lafferty Group, a name synonymous with retail banking for over 30 years. After voicing concern against the anomaly of having a vast, global industry handling the finances of the world’s banked population without formal professional education, the Lafferty Group decided that it could make a contribution.
With the help of like-minded retail bankers around the world the concept of an International Academy of Retail Banking emerged, a curriculum was developed, textbooks were commissioned, and pilot programmes were launched. Retail banks all over the world were keen to talk.
Now in 2013, the IARB has delivered its curriculum programmes and examinations in classrooms from Johannesburg to Lagos, from Cairo to Abu Dhabi and from London to Singapore. The focus to bring retail banking to a higher professional standard, which has initially been on Africa, the Middle East and Asia, is now being extended to the entire world. Classroom learning will no longer be a barrier to entry as the IARB curriculum is also available online via e-learning.
The opportunity to educate a new generation of retail bankers through beginner and intermediate courses will help ensure that from this moment on, international banking practices will finally be going in the right direction. Furthermore, when this new development in retail bank education is delivered on an executive level to top tier managers, the potential to affect change on a global level looks extremely promising.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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Michael Lafferty founded Lafferty Group in 1981 when he left the Financial Times, where he had been responsible for coverage of the banking industry. He had previously worked on the paper’s LEX team, the City Desk and been accountancy correspondent.