Triggering bank departure from UK lending standards agency | Money News

Two of Britain's biggest high street banks have quit a body dedicated to improving the industry's lending practices, sparking a heated debate and raising doubts about its future.

Sky News has learned that HSBC and Lloyds Banking Group have ended their membership of the Lending Standards Board (LSB).

Their resignations, along with that of Santander UK in April, mean three of the UK's five largest lenders have quit the organization this year.

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On Wednesday, it was reported that Barclays was also considering future involvement.

The exodus has led the organization to cut staff, with about a third of staff employed in its compliance department being let go, according to sources close to LSB.

The organization denied suggestions that the figure was as high as 75%.

HSBC and Lloyd's are expected to remain officially members until their resignations take effect in the new year.

The LSB is a self-regulatory body that originated in 1992 as the Banking Code Standards Board, designed by the British Bankers' Association and other trade associations.

The Board of Directors includes Paul Johnson, one of Britain's most respected economists.

The financial crisis that occurred in 2007 exposed numerous failures in industry behavior and led to the creation of the Banking Standards Board (BSB).

Last year, BSB closed after its main lender refused funding.

“We strongly disagree with HSBC and Lloyds Banking Group’s decision to withdraw LSB’s business standards,” an LSB spokesperson said in a statement to Sky News.

“This withdrawal will leave many of these banks’ SME customers without the supervision of the LSB or the FCA.

“This could cause even greater damage to small and medium-sized businesses.”

Banking industry sources said it was decided that LSB membership was unnecessary due to overlapping regulatory standards that the industry currently has to adhere to.

They said it includes consumer obligations overseen by the Financial Conduct Authority and new rules governing redress for authorized push payment fraud.

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A Lloyds Banking Group spokesperson said: “We are committed to delivering good outcomes for our customers and maintaining exemplary standards.

“We appreciate the LSB’s role in strengthening standards, but there is significant overlap with other regulations introduced in recent years.”

HSBC declined to comment, while Barclays has been contacted for comment.

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