“Free banking is a mirage, banking costs money, and a more transparent approach is needed,” Cook added, in a comment piece posted on the Jersey Finance website.
“Free utility banking is loss-making.”
Cook, who spent more than 20 years with HSBC before joining Jersey Finance in 2007, also believes bank charges should be more proportionate, so that young people’s first experience with banks is not “a raft of penalty charges” as they learn how banks work.
“Better financial education is needed, and banks could do more as part of the new account opening process. A money management ‘teach in’ would save pain for both parties in the long term.
“Save penalties for serial offenders.”
Cook said that Britain’s banks needed to make such changes to rebuild public confidence, because banking remains as one of the country’s few large, world-class industries.
“We all need a functioning, healthy and profitable banking system, capable of delivering value for money services, keeping our cash safe and moving our money around.”
Cook’s other recommendations:
- Make all core/non core risk products subject to eligibility checks
"Many of the products which have caused difficulty [for some individuals] work well for [other] customers. Customer need, and claims eligibility, should be key drivers. Large numbers of bogus PPI (payment protection insurance) claims will be made as a result of official pressure to pay up."
- Change remuneration back to traditional methods
"Traditional methods [of remunerating banks for their services] evolved over hundreds of years for good reasons. Pay [bankers] a reasonable salary for doing the job well; any bonuses could be in the form of long-term deferred incentives, vesting after significant periods, such as after 10 years or at retirement.
"Any serious misconduct should see a withdrawal of benefits and customer restitution."
- Introduce a universal banking code of conduct
"A binding code of conduct, with financial penalties applied for deliberate non-adherence" should be adopted by banks.
Under this code, banks would agree to "treat [their] customers fairly", and to "manage and declare conflicts of interest".
"The public needs to believe banks mean it when they say, ‘my word is my bond’."
Introduce ‘fair tax policies’
"Board committees are routinely formed for audit, risk, and remuneration, [so] why not corporate social responsibility, including tax?
"Tax is one of the important contributions an organisation makes to wider society, beyond its economic, wealth creation and employment benefits. Corporate social responsibility could be expanded to include fair tax policies.
"Tax planning is a policy matter, and [thus] should extend beyond the remit of the finance director."
• Manage the bank for all stakeholders
"Customer value, shareholder value and staff interests need to be balanced. Barriers to entry in banking exist to protect the public, but should not be used to create disproportionate value for executives.
"Entrepreneurs by and large risk their own capital, investment banking traders by and large do not. Rewards should reflect these differences."