The Commission delivered its findings to the Government today, which aim to “put ordinary people and society at the heart of a reformed banking system”.
It recommends that remuneration for frontline and branch staff should not be linked to sales, with no commission or bonuses received for selling products.
The Commission has urged the FSA to take enforcement action against senior management for any remuneration structures or sales targets that contribute to misselling, by putting excessive pressure on frontline staff.
It also calls for a rule that bans banks that advise clients from trading any form of securities, saying this would address conflicts of interest within investment banks.
The cross-party Commission was developed by Which? following a proposal from former Treasury select committee chairman John McFall, who wanted to ensure that the public had an opportunity to voice their opinions about the future of banking.
It was chaired by Conservative MP David Davis and members included McFall, Business Secretary Vince Cable, Which? chief executive Peter Vicary-Smith, former Schroders group managing director Philip Augar, Clare Spottiswoode, Hermes Focus Asset Management chairman David Pitt-Watson and economist Roger Bootle.
The Commission gathered evidence from consumers and consumer groups, regulators, banking groups and business leaders including Mervyn King, Lord Myners and Lord Turner.
It is calling for living wills detailing how customers would be treated if a bank fails and improvements to depositor protection including a new class of ‘safe haven’ accounts.
It also wants restructuring of the banks so that if one does fail, it does not damage customers or the economy, regulation that increases competition among banks and rewards for senior executives based on long-term business performance and shareholder return.
Davis says: “We have made recommendations to minimise the conflicts of interest inherent in banking and to limit the liability of the taxpayer and thereby reduce the risk to the economy.
“We also propose a structure and regulatory regime designed to entrench a stable and competitive banking sector for the long term.”
Which? chief executive Peter Vicary-Smith adds: “Banks cannot be allowed to go back to business as usual. We must never again be faced with a situation where consumers pay the price for the failures of the banking system.
“A major change in the structure, operation and culture of our banks is needed if we are to rebuild the trust in our banking system that was so badly damaged by the financial crisis.”