TURNER REFORMS

Turner Reforms and Other Proposed Changes to UK System of Regulating Financial Services

Turner Reforms and Other Proposed Changes to UK System of Regulating Financial Services

The Turner reforms have brought changes in the pattern of UK system of regulating financial services. This Review was published in 2009 on 18 March. (UK's Turner reforms could alter capital cost of derivatives: http://fow.com/Article/2176720/Themes/26528/UKs-Turner-reforms-could-alter-capital-cost-of-derivatives.html) Commissioned by the Chancellor of the Exchequer, it reviews the regulation of banks and bank-like institutions in the wake of the recent financial crisis. (Regulating Financial Services) One of the key messages from the Review is the implementation of a counter-cyclical capital and disclosure regime requiring banks to accumulate capital reserves in 'good years' that could be drawn down in the 'bad years'. Competing in the twenty-first-century business landscape requires that financial services organizations rethink not only product offerings but also the very nature of how value is provided to customers. (Kane 1997, 51-74) New market entrants hungry to acquire customers are rapidly rising to meet the competition head on by commoditizing prices and providing convenient technology access to products. Previously, technology-differentiated companies with deep pockets provided a competitive buffer between competitors. Now technology is within easy reach of any potential market entrant, blurring the lines between added value and customer service. (Llewellyn 2000, 219-317) The combination of skilled talent and technology, coupled with the ability to shift resources to take advantage of opportunities, is the essential ingredient for being competitive. A highly skilled employee needs little direction other than a clear understanding of the desired end result, reducing the need for a hierarchical organizational structure.

In the last quarter of the twentieth century, giving away a small household appliance when a customer opened a new bank account was considered to be practising customer service. This form of marketing and customer retention worked simply because the time taken to switch to another financial services company with the same basic bureaucratic processes deterred most customers. In the 1990s, consumers started examining the total value in a relationship as new Internet technologies, implemented by new market entrants and traditional financial services organizations, made switching convenient and easy, forever changing the ratio of gimmicks to service. Customers are continually raising the bar on what is considered an acceptable level of services, sometimes by simply moving to another provider. Unfortunately, many organizations are unable to detect unhappy customers until too late in the process, having to repair a damaged reputation instead of proactively preventing it. Customer retention is the key measurement of the effectiveness of the customer service process and its success is directly linked to two factors within the firm: the talent of the individuals and the structure of the organization.

People are the financial services organizations' greatest asset. (Littler, Hudson 2002, 71-80) Yet they are continually organized in structures which prevent them from attaining the business agility needed for the twenty-first century. Since the mid 1970s trends in the financial services industry have been driven by the efforts of the companies in the ...