While we slowly gear up for a banking inquiry early next year by members of the Oireachtas to investigate the events that led to the collapse of the financial sector here in late 2008, something seismic has just taken place in the UK.

Its seven biggest lenders have signed up to a new voluntary standards body that is intended to complement the work of the statutory regulator by instilling good behaviour into an industry that has been rocked by scandals.

The banks will report each year to the new Banking Standards Review Council, which will rely on naming and shaming lenders that fall short of its drive to raise standards. It will be similar in style to the Advertising Standards Authority.

The council will act as an independent champion of better banking standards.

It will not handle customer complaints. Rather, it will put the banking practices of the biggest lenders under the spotlight and publish the results. The idea is to improve the culture, competence and customer outcomes in a sector that has been scandalised over the past decade by incompetence, greed, fraud, excessive sales techniques, mis-selling and overcharging.

It’s coming is not before time.

So far, Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society, Royal Bank of Scotland, Santander UK and Standard Chartered have signed up for scrutiny. Others might follow.

It was recommended by Sir Richard Lambert, a former chairman of the Confederation of British Industry, who was asked last September to develop plans for a professional body to promote high standards in banking.

The plan is to have the new body up and running by the turn of the year. This will include appointing a chairman and chief executive and approaching a large number of banks and building societies to secure as “wide a participation as possible”.

It will meet once a year with non-executive directors or the chairmen or chairwomen of risk or reputation committees at the larger banks to discuss their progress relative to the previous year and to peers.

The council will publish an annual report, setting out where progress is being made both by the sector and by individual banks and building societies, and where more needs to be done.

In a letter on the council’s website, Lambert said success would “help to restore public trust in this vitally important sector of the economy”. It’s a lofty goal, though many remain to be convinced it can be achieved.

Nervous shifting
There must be some nervous shifting in chairs at the Irish Banking Federation's headquarters, not to mention at AIB and Bank of Ireland.

For a start, the running costs of the new council are estimated at £7 million to £10 million a year, which will be paid for by the banks. More pertinently, it would scrutinise the ethics and standards being applied within our largest lenders.

The banks here would no doubt argue the culture has already changed. This is true of the upper echelons of AIB, Bank of Ireland and Permanent TSB, where there has been a purge of directors and senior executives from the pre-crash era.

Rules around pay, bonuses and capital strength have been tightened and the Central Bank of Ireland has dished out several hefty fines for rule breaches.

SMEs can appeal to the Credit Review Office if they think they're getting a raw deal from their banks, while the Irish Mortgage Holders Organisation has sought to champion the rights of those in arrears with their home loans.

Yet all of this only really scratches at the surface. There is a deeper issue of ethics within the banks that percolates down through the ranks. How can we be sure this has been cleaned up? How do we know that cultures have changed?

What has happened to the commission junkies at branch level who pumped up the property bubble through slack administration and by making crass lending decisions?

Past experience shows us that the banks don’t learn from their past mistakes. Take AIB and the collapse of its Insurance Corporation of Ireland subsidiary in the 1980s, which almost brought down the bank. Or the $691 million in losses run up by US-based currency trader John Rusnak in 2002.

Next year's inquiry should give us the first chance to hear from many of the main players who made those key decisions in 2008-2009 – John Hurley, Eugene Sheehy, Brian Goggin and Brian Cowen to name but a few.

But it needs to be more than a backward- looking exercise seeking to identify a villain for the €64 billion bailout.

We need a vision for banking that ensures such events don’t happen again. An Irish version of the British Standards Review Council might be a good start.