Blog

Governance, regulation and compliance

21 December 2012, 14:34

Banking Standards Commission report sparks further debate on the banking reforms

Today the long and messy process of reforming the banking sector to avoid another catastrophe got shaken up by the publication of the Parliamentary Commission on Banking Standards’ report on ...

Post byMelora Jezierska

Today the long and messy process of reforming the banking sector to avoid another catastrophe got shaken up by the publication of the Parliamentary Commission on Banking Standards’ report on the reforms. A shake up which could also affect the way the reforms impact charities. The Commission was set up following the LIBOR scandals to look at standards in banking, and was also tasked with conducting pre-legislative scrutiny of the Banking Reform Bill, the Treasury’s package of measures (based on the Independent Commission on Banking’s recommendations) to reform the banking sector to increase competition, stability and integrity. The Commission’s scrutiny has turned out to be on the ‘critically probe’ end of the scrutiny spectrum rather than just a weak inspection to back up the proposals. The main headline of the 140 page report was that the proposed bank ring-fence (separating retail and investment activity) should be ‘electrified’ – i.e. measures should be put in place to prevent banks from pushing the limits and chipping away at the ring-fence. They suggest allowing the regulator to force a full structural separation on a bank if its ring-fence is not working as it should, and a periodic review of the effectiveness of ring-fencing across the sector to consider whether separation would be a better option. What we’re particularly interested in, however, are their thoughts on the introduction of depositor preference. We met with Treasury and did some work on the effect the measure would have on charities – in a nutshell, depositor preferences places ‘insured’ deposits (those covered by the Financial Services Compensation Scheme, FSCS) at the top of the creditor queue for payout when a bank fails, meaning the claims of other creditors , including charities, are pushed further back. We were concerned that depositor preference would result in charities losing a higher proportion of their deposits in the case of bank failure (see our consultation response for further details). The Commission’s report highlights some of the problems with depositor preference: that it would force increased losses on those it wouldn’t really be desirable to force losses on, citing examples provided by Which? and the ICAEW (plus our own evidence) such as larger charities, schools, local authorities and individuals holding more than £85k (the FSCS compensation limit) in the bank to buy a house or after an insurance pay-out. This in turn would be politically problematic – would MPs really be able to leave creditors in their constituencies like these to just accept big losses if a bank collapsed? The report says that it’s ‘unconvincing’ that all creditors would be treated the same in these circumstances. Their resulting recommendation is that the Government and Bank of England create a joint group to produce a full report on the ‘implications for resolution of depositor preference and of the scope and extent of depositor insurance’. They also suggest the report should consider ‘the feasibility of establishing a voluntary scheme of insurance for deposits over £85,000 with arrangements for opt-out’. If this goes ahead it will be interesting to see what direction things go in – and could potentially mean good news for charities. Â« Back to all blog posts

Blog

Banking Standards Commission report sparks further debate on the banking reforms

Related Content

Finance Focus April 2021

Finance Focus January 2021

How to share your story through your annual report

Finance Focus November/December 2020

What does the Spending Review mean for charities?

Are you Brexit ready?

Three-year Comprehensive Spending Review replaced

Welcome to IFR4NPO

Finally, international guidance is within reach

Finance Focus September

Finance Focus August

Finance Focus July

Charity Commission guidance on Serious Incident Reporting during the coronavirus pandemic

How to guide: Covid 19 Charities SORP Committee Guidance

Charities and insolvency

Top ten tips for how to handle the year end in a pandemic

Caron Bradshaw appointed as a member of new SORP Committee

Has the Charity Commission has taken the wrong tone in its election guidance

Why does the narrative around public 'trust' makes me feel so uncomfortable?

Civil society asks of the Spending Review 2019

Five takeaways from August’s Inflation Report

The lessons for Oxfam and the wider sector

Finance Focus July 2019

BEIS Review of the Financial Reporting Council

CFG Annual Handbook 2019

How the best boards do it, from preparation to meeting execution

Seeing the wood for the trees

CFG responds to the Charity Commission’s consultation on the SORP-making process

What the recent SCOTUS judge controversy can teach us about the Charities’ SORP

Annual Report 2017-18: Empowering Your People

Changes to the CFG Board of Trustees

Finance Focus May 2018

The key to good governance - truly understanding the business

Essential Charity Finance for Trustees Guide

Does your charity follow serious incident reporting guidelines?

Charity finance professionals need to be aware of new automatic disqualification rules

How big a threat is property to your charity?

Money is not the issue when it comes to charging for Charity Commission

How can charity investors perform better in a volatile market?

A stairway to heaven on business rates for the charity sector?

Investing in financial governance is one of the most cost effective ways to help your charity

Sarah Atkinson - Have your say on the annual return for charities

New report raises concerns about complacency on financial governance

Trustee Survey Report

Time to review your risks? An update from the experts...

Where are the ‘automatic stabilisers’ for charities income?

6 simple steps your charity can take to help protect themselves from fundraising fraud

Do I need a fraud response plan?

Fraud and the 3 C's

Three new Charity Finance Group trustees elected

How can charities ensure they work towards gender equality in their organisation?

What can charities learn from the recent fraud cases?

CFG launches Counter Fraud Campaign

Record Management Toolkit Launch Roundup

What can charities learn from the international cyber attack?

NCVO Almanac points to fundamental shifts in the charity operating environment

Better partnerships needed between finance and fundraising teams

Annual Report 2016-17

We must not see a rush to charging charities for regulation – House of Lords report

IFS 2017 Green Budget – the good, the bad, and the worrying?

Responsible Record Keeping: what do voluntary organisations need to know?

Trustee Week: Working to inspire good leadership

Charging charities for regulation isn’t inevitable but it is risky and inefficient

Let's talk about the F-word

Tony Armstrong looks at Devolution: working with local organisations to transform public services

Devolution is our chance to advocate for the most vulnerable

How will the 'devolution revolution' be financed?

Caron asks: 'Why does the voluntary sector need a devolution summit?'

Do charities need to become social enterprises to survive?

Ten things you should know about the new power to make social investments

New report should prompt major re-evaluation of social investment

EU Referendum: Keep watching this space…

CFG's SORP Survey

Guest blog: Stamp duty increase reinforces case for charity investors to invest in stamp-exempt funds

Guest blog: SAVE Financial Planning

Guest blog: Insights into charity investment practices

EU Referendum: What could this mean for charities?