Bank Exodus Sparks Controversy with UK Lending Standards Body

By Evans Momodu
2 minute read


HSBC and Lloyds Banking Group, two of the UK's largest high street banks, have withdrawn from the Lending Standards Board (LSB), sparking controversy and raising concerns about the body’s future.

Their resignations, along with Santander UK's exit earlier this year, mean three of the five major UK banks have left the organisation in 2024. Barclays is also reportedly reconsidering its membership.

The LSB, originally established as the Banking Code Standards Board in 1992, plays a key role in promoting ethical lending practices. It gained prominence following the 2008 financial crisis when failures in banking conduct highlighted the need for stricter oversight.

However, with the introduction of new regulations, including the Financial Conduct Authority’s (FCA) consumer duty and rules on fraud reimbursement, banks argue the LSB’s standards have become redundant.

Key Developments:

• Staff Reductions: The LSB has been forced to cut about a third of its compliance staff, though it denies claims that redundancies are as high as 75%.
• Banking Concerns: An LSB spokesperson criticised the banks’ departures, stating that without its oversight, many small and medium-sized enterprise (SME) customers would face a higher risk of harm.
• Bank Justifications: A Lloyds spokesperson emphasized that the bank remains committed to high standards but cited duplication with newer regulations as a reason for leaving. HSBC declined to comment.

The resignations follow a broader trend, as the Banking Standards Board (BSB) also closed last year when major lenders ceased funding it.

The departures have sparked a debate over the role of self-regulation versus statutory oversight in maintaining ethical banking practices. Critics fear the absence of bodies like the LSB could leave gaps in consumer and SME protections.
Source: Sky news