Angela Knight is a few days into her new role as chief executive designate of the British Bankers’ Association, but already she has been making high-profile speeches on fighting financial crime just like the professional politician she used to be.
“I am still getting to grips but I have done my homework here learning some of the figures,” she laughs, bustling into her new office in Old Broad Street, London with a sheaf of papers.
Ms Knight, who takes up the position as chief executive on April 1 2007, has arrived at the BBA after eight years as chief executive of the Association of Private Client Investment Managers and Stockbrokers (Apcims).
A former Tory MP who ended up as economic secretary to Chancellor Kenneth Clarke in 1997, Ms Knight earned a reputation at the investment industry lobby group for forceful interventions on behalf of her members and an energetic style.
Now the banking industry is hoping she will make a similar impact for them.
The BBA has 220 members but believe it lacks the clout that it could command.
Ms Knight reels off the statistics in her public relations armoury: banks pay a quarter of all UK corporation tax; the industry employs a million people; it handles 7bn transactions each year and more than 100m accounts; and many bank shareholders are UK pension funds.
“It is a huge global industry. We have few of them left in the UK and this is one we should be proud of and recognise,” she says.
Ms Knight is taking up her position at a time when the banking sector is booming.
In 2005, the total profits for the UK’s banks topped £33bn as sector leaders including HSBC, Barclays and Royal Bank of Scotland announced record results.
But banks are under attack from politicians and consumer groups complaining about poor customer service and bank charges, attacks made all the more pointed by the stream of record profits. Last year, the Banking Code Standards Board, which runs a voluntary code for the industry, received 3,500 customer complaints and inquiries in 2005 were up by half compared with 2004.
Recently HBOS became emblematic of public discontent when it was targeted on behalf of 150,000, mainly low-income customers of the Farepak Christmas saving scheme.
HBOS decided not to extend an overdraft facility to the parent company, leading to the administrators being called in. The bank later contributed £2m to a relief fund for the clients, who were owed an average of £400 each.
The sector also faces heavy scrutiny from UK and European regulators.
In the UK, the Office of Fair Trading is examining penalty fees charged on overdrafts and the sale of payment protection insurance. It has already forced banks to cut their £23 penalty fees on credit cards to £12 after ruling they were “unfair”.
Ms Knight leans over the table to point out that much of the profits are being generated not from consumers but from BBA members’ growing wholesale and corporate banking operations.
“If you look at banks and where the profits are made, they are made in wholesale and international, not in consumer banking.
“That does not mean consumer banking is unprofitable but the big numbers come out of wholesale,” she says.
As a former politician Ms Knight says she understands that banks and government do not always have an easy relationship.
“Don’t expect me to be word perfect on day two,” she says, “relations between the banks and the government have not necessarily been terribly easy and they won’t always be terribly easy – the government and any big sector of the business world are always going to see things differently. The fundamental point is can they work together?
“I think the banks do feel they’re the target for every conceivable inquiry going – they’re the big elephants in the room . . . I would like to move the situation on – yes. It’s a terrible New Labour expression . . . [but] . . . I would like to move the situation on.”
It is a sentiment that appears to be reciprocated.
Ed Balls, the current economic secretary to the Treasury said last month that banks’ record profits should be a cause for celebration and added that the government did “not view bank profits as undesirable”.
Ms Knight has already started to tackle one key issue facing the banks – that of rising Individual Voluntary Arrangements (IVAs), personal insolvency packages that are being aggressively marketed by debt management companies.
Many banks believe IVAs are responsible for rising bad debts in their retail banks and point to changing consumer behaviour following the 2004 Enterprise Act which removed much of the stigma of bankruptcy.
The number of IVAs has jumped from 5,000 in 2002 to an estimated 40,000 this year. In the first half of the year, banks wrote off £3.3bn in bad debts in their retail bank divisions partly because of rising IVAs.
Among Ms Knight’s first tasks in early December was meeting about 30 debt management companies that market and sell IVAs to consumers. They agreed to set up a new industry code aimed at lifting standards.
Ms Knight says: “IVAs have a role to play, some people do get themselves into a terrible fix and we have all got to help them get out of that fix.
“I think the question that arises with IVAs is how they are being sold and how they are being advertised and what sort of advice is being given and do the individuals that are taking out an IVA realise how much it is costing them both in terms of money and in terms of what happens later.”
She says her eldest son, a university student, was mailed by an IVA firm offering him the chance to walk away from most of his debts with no adverse consequences.
“We had one of those heated conversations and he convinced me – and he was right – that he had not got himself surreptitiously up to the eyeballs in debt and so this was an out of the blue mailshot.”
However, she was very concerned at the suggestion he could just walk away from most of his debts in an IVA with no adverse consequences. “I don’t think that’s right,” she says.
A critical issue during her watch will be the debate about whether consumers will continue to enjoy free banking in the UK, or will they have to pay an annual fee as in the US and most of Europe.
The OFT has asked banks to justify the level of penalty fees charged on overdrafts and mortgages.
Some banks say privately that if they are forced to cut overdraft fees they will have to recoup the lost revenue elsewhere and may charge customers a fee to operate their accounts.
Ms Knight says: “We have got regulatory changes around and that does not mean the end of free banking. It’s an easy headline to make.”
She has no illusions about the scale of her task to counter the growing sounds of criticism of the banks from both consumer groups and MPs.
“One of my tasks is to get into public domain better what banks do and their importance . . . and . . . to shift that perception of this industry from being one that you automatically shoot at to one which is at the very least respected.”