Britain's biggest banks and building societies are to be subjected to a report on their behaviour each year by a new independent body that will assess progress on restoring the reputation of the financial services industry.
The banking standards review council, which will interview banks' non-executive directors each year, will initially be run by Sir Richard Lambert, former Financial Times editor and former chairman of the employers' body the CBI, who has been consulting on its scope since February.
Lambert said: "It is essential that work gets under way immediately and the current momentum on setting up the new banking standards review council is maintained, in order to demonstrate to the public that the industry is fully committed to this initiative."
The Bank of England governor, Mark Carney, supported the creation of the body, which was suggested by the parliamentary commission on banking standards set up after Barclays' £290m fine for Libor rigging.
Carney, who will sit on the panel that selects the head of the body, said: "The Bank of England is doing its part to ensure safety and soundness. Integrity, however, cannot be regulated. It must come from within".
The standards body will not have powers to fine banks, but will derive clout from the publicity generated by annual updates on banks' behaviour. He expects the body to need a budget of up to £10m a year and draw up principles for the industry.
Lambert said measuring the conduct costs incurred by banks for fines and other provisions was useful but not the only way to measure whether banks were improving but said qualitative judgements would also be needed. The London School of Economics conduct costs programme has estimated the big four banks incurred £21.5bn of conduct costs in 2013.
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