Memorandum from the Banking Insurance
and Finance Union (BIFU)
BIFU is a TUC-affiliated trade union representing
workers employed across the finance sector. This submission responds
to the Treasury Select Committee's request for views concerning
the activities to be covered by the proposed Regulatory Reform
Bill and how the FSA can deliver effective regulation. A summary
of the main points is presented below:
Employers in the finance sector can
add an important dimension to the quality and scope of regulatory
decisions. Practitioner involvement is important and the definition
of a practitioner should be broadened to include those working
in the "front line".
Recognition needs to be given to
the inter-relationship between regulation and employment practices
and how it impacts on the consumer.
The FSA should have a duty to consider
the issue of access to financial services as a statutory objective.
"Consumers" should be defined
in the broadest sense to include those unable to gain access to
affordable or appropriate financial products or services.
The FSA Bill should underpin the
Banking Code of Practice by making it a licence requirement to
adhere to it.
The FSA Bill should consider any
powers and objectives the regulator would need in relation to
information and disclosure legislation.
1. The Banking Insurance and Finance Union (BIFU)
is a TUC-affiliated trade union representing some 113,000 members
employed across the finance sector. The Union represents staff
in all grades and all occupations, not only in the major English
and Scottish banks, but also in international banks, the Bank
of England, insurance companies, building societies, finance houses
and the FSA itself.
2. The Union supports the FSA's aims of consumer
protection, the promotion of clean and orderly markets and the
maintenance of confidence in the financial system. We are committed
to good practice throughout the sector.
3. The terms of reference of the Treasury Committee's
inquiry are detailed in the Committee's Press Notice No. 14. This
submission addresses the issues of activities to be covered by
the new Bill to ensure a satisfactory level of consumer protection,
and how the FSA can deliver efficient, cost-effective and practicable
4. BIFU wishes to ensure the professional integrity
of our members and recognises the importance of having a finance
sector that is well regarded by the public. We are pleased to
have this opportunity to contribute to the Committee's inquiry.
5. BIFU contends that those who work in the
industry can add an important dimension to the quality and scope
of regulatory decisions. The active involvement of those who work
at the sharp end of the industry can provide insights which are
of real value to the aim of consumer protection. For instance,
the pressures of commission-based payments systems is something
representatives of finance sector workers have highlighted for
some time. It appears that only after the misery and adverse publicity
caused by the pensions mis-selling episode that the consequences
of such pressures for consumers are being recognised.
6. We are also only too aware of the way in
which regulatory issues impact on the livelihoods and careers
of those who work in the industry. This only strengthens the case
for the involvement of "front line" practitioners in
the regulation process.
7. In our response to the FSA's consultation
paper on practitioner involvement, we make the point that the
definition of what constitutes a practitioner needs to be broadened.
Regulators have tended to restrict it to directors and senior
executives of financial institutions. BIFU believes this should
be extended to include "front line" practitioners who
have particular knowledge and experience of the industry and the
effects of regulation.
8. We endorse the reasons for practitioner involvement
outlined in the FSA's consultation paper No. 2, namely:
formulate sensible policies and improve
react promptly and appropriately
to new products/practices;
practise efficient, cost-effective,
proportionate and practicable regulation;
avoid unnecessarily inhibiting innovation
or impeding firms in serving their customers;
engender industry confidence in the
fairness and quality of FSA's exercise of powers;
secure the understanding and commitment
of the regulated community.
9. We believe that these objectives will be
best met with the active involvement of those who work at the
sharp end of the industry.
10. Regulators have tended to dismiss the relationship
between their operations and employment practices. BIFU strongly
contends that this is simply not an acceptable or responsible
way for a regulator to behave. Among the regulatory issues that
impact on the work environment of the industry's employees and
have implications for consumer protection are remuneration systems,
references and discipline (see paragraphs 13-15 for further detail).
11. The FSA should establish a standing panel
on employment practices to investigate the inter-relationship
between regulation and employment practices and how it impacts
on staff and customer service. We also believe that the issues
of training and competence and financial literacy are worthy of
12. On the issue of individual registration
and discipline, BIFU has a number of concerns which require practitioner
involvement in order for them to be resolved effectively.
13. The first concerns the legal relationship
between the employer and the employee. At the moment it is not
clear which area of law, employment or regulatory, takes precedence.
There are many areas of overlapping procedures. For example, complaints
registered against an employee for compliance purposes may affect
their appraisal, performance related pay and/or selection for
14. In addition, there are areas in which complaints
may arise which are beyond the control of the individual employee.
For example, where a product has not performed as well as the
customer had hoped for or where pressures are put on individuals
internally in the company to sell certain products, for example
by the nature of the remuneration system.
15. Thirdly, the FSA must ensure its procedures/requirements
are clearly understood and consistently observed. BIFU has had
experience of individual employers' uncertainty about their obligations
under current regulatory requirements, particularly when it comes
to the area of employee references. We have had cases where individual
employees have not known about complaints lodged by their name
and these have only come to light when a reference has been sought
by a potential new employer. In at least one case, even though
all complaints against an individual had been rejected the potential
employer stated they would not endorse their offer of employment
because of the number of complaints that had been received. Employees
who have committed no offence could find themselves unable to
work in the finance sector ever again.
16. BIFU is committed to wrongdoers receiving
the appropriate punishment. However, workers in the industry should
not be subject to unfair, and potentially career threatening,
sanctions in the name of "regulation".
17. The FSA needs to ensure that the terms of
individual registration allow for fair and open disciplinary and
appeals procedures. It also needs to examine how these relate
to employers' own disciplinary procedures and obligations regarding
18. We believe that the points outlined above
re-enforce our arguments concerning the inter-relationship between
regulation and employment practices and the need to establish
a separate Employment Practices standing panel.
19. Access to basic financial services is increasingly
an essential part of social well-being in a modern economy. Yet,
according to the Policy Studies Institute, one in five householders
do not have a current bank account, a quarter have no house contents
insurance and little over a quarter have no credit facilities
(The Guardian, 11 February 1997).
20. Possession of a bank account is increasingly
important for the receipt of salaries, pensions and benefits,
as well as for the payment of bills. BIFU believes that access
to financial services is essential to full participation in the
community and promotes the concept of "financial citizenship".
21. Utilities regulators have a duty to consider
the interests of the disadvantaged. We believe that the FSA should
have a similar duty in relation to access to financial services
and that this should be a statutory objective of the FSA. The
objective might be: "to have regard to the need for access
to appropriate financial services for all sectors of the community."
22. BIFU thinks it is important that the FSA
defines "consumers" in the broadest sense. Rather than
focusing solely on those already in the financial system, "consumers"
should also include those unable to gain access to affordable
or appropriate financial products and services.
23. BIFU has a particular interest in the issue
of bank and building society branch closures. We think that banks
should be required to consult all stakeholders (including unions,
customers and local communities) before closing branches and to
consider how to address the needs revealed by the consultation.
We believe that this could be included in the banking code of
practice and that the FSA Bill should underpin the code by making
it a licence requirement to adhere to it.
24. BIFU is also interested in the potential
for information and disclosure legislation, drawing on the experience
of the Community Reinvestment Act in the USA, requiring banks
to report on the distribution of their lending. Whilst we assume
that this would require a separate piece of legislation, we are
keen to ensure that any powers and objectives that the regulator
needs to carry out its role in this area are identified when drafting
the FSA Bill. These would include the powers to require information,
to require release of information and to carry out research.
21 April 1998