LONDON: Britain's banks must bridge the "great divide" with a distrustful public to maintain a well-functioning financial system that supports growth, a senior Bank of England official said on Wednesday.
BoE Chief Economist Andy Haldane said there was a "yawning gap" between how banks see themselves and how the public views the sector.
Members of the public who attended the BoE's Open Forum last November on fixing the financial sector described the industry as self-serving, greedy, corrupt and destructive.
"They underscore just how far finance still has to travel to regain its social licence," Haldane said in a speech. Britain's banks, which the BoE regulates, have paid billions of pounds in fines for trying to rig interest rate benchmarks and currency markets, and billions more in compensation for mis-selling loan insurance.
Haldane said the financial sector may need new ways to "define and communicate" its purpose to act as an "antidote to the short-term demands of shareholders and executives". With the market value of banks worth less than the assets on their books, lenders are a "value-destruction" machine for investors, he said.
Economies have suffered even bigger losses than banks from the 2007-09 financial crisis, scarring growth potential and contributing to flat-lining productivity.
"So a lack of trust in finance potentially hobbles both economic growth and financial stability. That lack of trust is the mirror-image of the perception gap between the financial sector and wider society, the Great Divide," he added.
For much of their history banks were local, with people interacting with branch managers, but in recent years a more centralised sector has emerged to weaken trust.
With a looser personal touch, banking began falling behind hairdressers and doctors in the personal trust stakes, Haldane said.
The financial crisis accelerated the shift, with banking plummeting from "mid-table mediocrity to relegation-threatened remorse" in the trust league, Haldane added.
Only estate agents, journalists, government ministers and politicians fared worse than bankers in surveys on public trust, Haldane said.
New rules making banks safer and consumers better protected are important but probably insufficient "down payments" towards closing the trust deficit, Haldane said.
Enhancing public education on finance, instilling and communicating a sense of "purpose" and restoring the personal touch in banking would also help, he added.
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