Financial services trade associations face amalgamation in FSTAR review
Plans to merge or otherwise amalgamate some of the existing banking industry trade associations have taken a step forward with the publication of the Financial Services Trade Association Review, outlining four possible scenarios and their risks.
The review was launched last year by nine UK retail banks and one building society to ensure that existing bodies were suitable to represent the UK financial services industry. In January this year, a working group proposed that the main banking, consumer finance and wealth management trade associations should be merged into a single body, but the consultation shows that some sectors of the industry feel this would be a step too far, leading to over-representation by one or another sector.
The main reason for change is the criticisms of existing associations that were picked up by the FSTAR review. These include complaints that the associations sometimes haven’t gathered the necessary evidence to back up their proposals to policy makers, undermining their ability to achieve change; that member engagement in trade associations is insufficiently senior, detracting from their ability to discuss and tackle strategy properly; that there are too many associations, leading some stakeholders to not bother and leading to fragmentation and silos; that that some associations present a lowest common denominator view as they attempt to represent all members, reducing the value of the contribution; meanwhile some others are too narrowly focused on their own interests; and that trade associations need more speed and agility to be effective policy partners. In addition, some associations simply present objections to policy proposals without suggesting a constructive alternative.
Based on a consultation earlier this year, the Review team has outlined four options designed to improve the situation and indicated its preference for the middle two. These are:
- Model A – increased coordination
- Model B – partial integration
- Model C – integration to create a largely retail and commercial focused association
- Model D – full integration under the maximum scope
“Over the past 10 weeks we’ve spoken to a large number of people about these questions and have set out the feedback we have received,” said Ed Richards, chair of the Financial Services Trade Associations Review. “There are four credible revised options that we propose, although our initial view is that on balance, the options involving some integration look the most attractive.”
However, despite the push towards change, the Review did acknowledge that changing the system could bring risks of its own. Chief among these, the danger that the role of any combined organisation becomes poorly defined or vague, productivity and speed may be lost, and there could be a tendency towards blandness in a broadly-scoped trade association with diverse membership, while smaller members could find their voice diminished. The FSTAR rated option A as the least likely to be effective, with option C as the most effective but also somewhat risky. Option B offered the best balance, according to the Association’s analysis.
Conversely, the benefits of increased scale and scope were identified as promoting better coordination, integration and effectiveness with external partners. The FSTAR reports that stakeholders identified improved coordination as a benefit by many respondents in the January document. Policy overlap has been identified between numerous associations, including the PUK, UKCA and the BBA. Unsurprisingly, cost reduction figures as a potential benefit of integration. In addition, the FSTAR believes that more integration would bring greater weight of voice, visibility and access to senior stakeholders. In addition, the industry could speak with a single unified voice, and a greater range of perspectives could be offered. It might also allow better policy synergies across products and sectors, help to attract the best talent, and streamline the use of senior management time within member organisations.
Organisations affected by the review include AFME, the BBA, the BSA, EBF, Payments UK (formerly the Payments Council), SIFMA, the UK Cards Association, the Wealth management Association and seven others. The FSTAR is still collecting feedback on its proposals, which can be seen in full here.