The BSA submitted a formal response to the Parliamentary Commission on Banking Standards in response to its call for evidence at the end of July. The Commission was set up in the wake of a series of scandals to hit the banking sector (including the fixing of the LIBOR rate) to look into the professional standards and culture of the UK banking sector and to consider the lessons to be learned about corporate governance, transparency and conflicts of interest.

The Commission has now published the submissions it received from a wide range of organisations including companies, trade bodies and pressure groups.

The BSA's submission urges the Commission to consider changes to the structure of the banking industry that break the power of banks that are too big and complex to fail. The BSA also asked the Commission to look at ways in which competition and stability in the financial services sector can be enhanced through a greater diversity of ownership structures, rather than domination of the sector by shareholder-owned plc banks.

BSA's submission reminded the Commission that mutuals are owned collectively by their customers, that they have a very different culture to shareholder-owned plc banks and that no mutual lender or deposit taker is involved in the LIBOR setting process. The BSA also emphasised that mutually-owned institutions did not sell swaps to small and medium businesses and that mutuals were not responsible for the widespread mis-selling of Payment Protection Insurance (PPI).

The submission also challenges the Commission on the difficulty of trying to correct failings in corporate culture through regulation of professional standards. The culture and ethics of any organisation emerge from the interaction of the values of the people who work in the firm with its structure, leadership and external environment. Therefore ethics and behaviours can be best improved through reforming the structures of firms or the operating and regulatory environments they work in.

The BSA submission supports the ring-fencing of banks and calls for other reforms, including changes to governance structures, that encourage ring-fenced retail banks to operate in ways that make them easier to deal with should they get into difficulties, so that they do not benefit from implicit taxpayer support.

The full BSA submission to the Parliamentary Commission can be found here.