Given the history of the last 20 years it is difficult to imagine a world where senior bankers recited an oath every day at the start of their adrenaline-fuelled, early-morning meetings. The world might have been very different if they had.
London-based banking expert Michael Lafferty has put the oath – one borrowed from The Netherlands – at the heart of an international training programme for retail bankers that's increasingly finding favour with banks as they seek to win back public trust.
Just three paragraphs long, it declares: “I declare that as a retail banker I will act with integrity in the interests of bank stakeholders and society at large. I will prioritise clients and advise them to the best of my ability.
“I will comply with all laws, regulations and codes of conduct that apply to me as a retail banker. I will maintain strict client confidentiality and hold myself accountable. I will not abuse my position, or the knowledge obtained in it.
“I will make a sincere effort to preserve and promote trust in the banking sector, and will honour the profession.”
The pledge is the central core to the International Academy of Retail Banking, set up by Lafferty two years ago.
Designed from scratch “because none of it existed anywhere”, the academy is now offering specifically-tailored courses for those who will spend their careers in retail banking, rather than in investment, or corporate divisions.
Instead of living by such a creed, banking from the 1980s gorged itself. “[Bankers] liked dealing with big figures, big numbers. They liked doing deals. They didn’t really feel that inspired by doing business with ordinary people,” Lafferty argues.
However, the crisis was not accidental: it is buried deep in the DNA of banks. “The top jobs always went to the corporate bankers, and retail banking was always used and abused for the purpose of serving the needs of corporate customers.”
In the end, it was all about money, the Ballaghdereen, Co Roscommon-born Lafferty argues bluntly.
“Investment banking is where the money is that the CEOs and the investment bankers can get their hands on to pay out to themselves, not to shareholders.
“What goes on to a significant extent is that the retail profits are channelled over into the investment profit book and distributed through the investment bankers,” he argues.
Despite the image, day-to-day mundane branch banking is where the money is. Four years ago, according to the Economist, it generated more than half of all global banking revenues.
In the UK last year, major banks made nearly £9 billion from current account charges and overdraft fees.
So far, 3,000 people have started the academy’s courses, which are designed to be completed in modules, thus offering the maximum flexibility to people holding down day jobs.
The first graduates are trickling through now. More will emerge in coming months.
Chartered accountant
"The whole teaching is around saying that retail banking should not be about selling, which is what it has become.
“It has become a nightmarish experience for people when they interact with their bank. They are more likely to be worse off afterwards than they were before,” says Lafferty.
“Retail banking should be about doing what is best for the customer. And it shouldn’t be about pushing products at them, it should be about looking at their overall needs.”
Now in his early 60s, Lafferty left Roscommon and moved to London in 1967, becoming a chartered accountant in 1971 at 21. Soon, he joined The Financial Times, ending up as the newspaper's banking correspondent.
In 1981, he founded the Lafferty Group, which has produced highly regarded monthly bulletins and newsletters for the banking industry in the years since. In turn, Lafferty has become a figure in the world of global banking.
Much of the problem in banking lies in training, or the lack of it, he argues. “Banking never became a profession, partly because the banks didn’t want their people to become professionals in the same way as accountants, or lawyers. They wanted to keep people tied to them.”
During a 40-year career, there are few influential figures in banking that Lafferty has not met. Recently, former Citibank chief executive John Reed was interviewed by Lafferty for one of his company's publications.
“You have to understand that the products of financial institutions are of importance only to the financial institutions, they don’t have any meaning to the customer. No one wants a mortgage – they want to buy a house,” Reed told him.
The “bankers’ exams” – run by the traditional banking institutes and once a staple part of the early career of young bankers – covered everything that they might hope to encounter during a career, rather than being particularly targeted at retail banking.
Last month, Lafferty's academy was accredited by the Chartered Banking Institute in London, which will be "extraordinarily helpful" in developing its standing with banks in South Africa and southeast Asia, he says.
The existence of problems is accepted. Josef Redl, vice-president of the Austrian Financial Marketing Association, told The Irish Times: "It is not acceptable that bank employees are forced to sell products which they do not understand completely."
Rebuilding trust
Trust must be rebuilt with the public, but not in the interests of the public, Redl argues, pointing out that so-called "traditional" banks relying on a branch network must have a genuine relationship with their account holders, if they are not to lose them to newer competitors.
“Banks should stop selling products without looking to the needs of the customers. But that’s not only a matter of training but also one of organising the whole sales process. Extremely high product targets lead automatically to ‘hard-selling’,” the Austrian warns.
Basic banking is not simple, argues Banque Paribas’s head of business development Arnaud de Villepin. “Take credit cards; there is technology in it, a lot of marketing, serious financial models, regulations, history.
"That's pretty basic from a banking perspective, but from a sales and marketing perspective, that is probably one of the more complex products that banks have to deal with," the French banker told The Irish Times.
So far, Lafferty is largely focused on banks "where banking is not in trouble, in places like Asia, Africa, and Latin America", believing that emerging markets are more cutting-edge than a Europe that has been "bogged down in crisis and all sorts of problems for 10, 15 years".
"Having said all of that we actually do have major banks in Europe: ING, for example, Spanish and French banks. The interest is considerable," he says, adding, "We don't have any clients currently in Ireland, but we are having interesting discussions with one bank."
