His hopes and fears for the banking industryStressing the significance of the annual progress report that the proposed Banking Standards Review Council (BSRC) is due to publish, the chief architect of the Banking Standards Review says: “It will be looking for excellence [in the banking system and the performance of individual banks]. That will be where its credibility is damaged or not. If it turns out to be a PR document for the banks, then you can forget it. It will have to be prepared to annoy the banks.”

Lambert maintains that there are already signs of change within the industry – such as the recent FCA report that said “all major British retail banks had significantly changed for the better the incentives in their retail branches,” particularly regarding the sales of products such as PPI.
"Seeing the news shots of the queues outside Northern Rock was the most shocking thing, because it shouldn’t have happened"Looking to the future, the Balliol College history graduate says: “There are three pieces in the jigsaw puzzle. The big one is, the leadership at the banks: are they going to do different things from what they were doing in the run up to the catastrophe? Is the regulation proportionate and sensible? And will that change incentives so that bankers are motivated to serve the public interest rather than their own interest? If those are in place, then this body that I am proposing will make a useful contribution. If they are not, this will be a waste of time.”


His career highlights at the Financial Times (FT)“Well, I worked for 200 years at the Financial Times. I left university and went straight there. My comparative advantage, if I had one, was that I was interested in finance – unlike quite a few of my colleagues. So I did the financial jobs. I did the Lex column and I was Financial Editor and New York Bureau Chief. And then for a long time I was Deputy Editor to Geoffrey Owen.

“He’s my hero still. We have breakfast every three months. He’s writing a book on biotechnology. Why has the UK not created any great biotechnology firms when we had all the intellectual property?

“He’s 80 next month. And he keeps saying, ‘What do you think I should do next, Richard?’”

Sir Richard Lambert’s CV
2012-14: Chairman, Banking Standards Review

2011: Knighted for services to business

2008: Chancellor, University of Warwick

2006-11: Director General of the CBI

2003-06: Independent Member of the Bank of England MPC

2001-03: Writes Lambert Review of Business-University Collaboration

1991-2001: Editor, the Financial Times

1966: Graduates from Balliol, Oxford (History), joins the Financial TimesReturning to the story of his time at the FT, he says: “I tended to do the financial bit of the paper and Geoff tended to do the industrial bit of the paper. And then I was editor for ten years. I spent 18 months doing the US edition, which was really good fun.”

One of his first stories was “the terrific scandal of a fund management group called Investors Overseas Services, which was based in Geneva.

“And it shows how ignorant the FT was in those days: they sent me. I couldn’t read a balance sheet. The editor came out and said, does anybody know what IOS stands for and I said yes.” And he said, 'Go there.' Oh God, it was a nightmare.”

Lambert must have done a good job, because there were many similar stories to follow. “There was the secondary banking scandal, the crisis of 1973–74. Then there was a big Bank of England rescue of the secondary banks. And then the structure changed completely with the removal of foreign exchange controls in 1979.

“Until then, UK banks had been entirely domestic. Then there was the Big Bang and everything changed.

“After that came a whole series of bank failures. Johnson Matthey, where the Bank of England bailed it out without telling the Treasury. And then Barings. That was very exciting and dramatic. So they were a pretty regular occurrence.”


Failing to spot the telltale signsAsked if there was any point during his career as a journalist that he felt uneasy about the way the banking system was changing, Lambert replies: “I don’t want to claim hindsight. I felt uneasy about the degree of financial engineering developing in the ’90s, which encouraged industrial companies like ICI and GEC to commit hara-kiri, which happened. But I wasn’t a banking correspondent and I can’t claim any great insights.”

At what point did he feel uneasy?”

“Too late.”

When exactly?

“Well, maybe we should fast-forward a couple of years. I left the FT in 2001 and I did a few other things. Then I went to join the Monetary Policy Committee (MPC) at the Bank of England, from 2003-06.

“I was completely preoccupied with inflation. The statutory responsibility individual members of the MPC are tasked with is setting interest rates, so as to keep inflation under control. We would spend lots of time thinking about how credit was being priced. 

“For me it was all about inflation. ‘How could what’s happening to house prices feed through to inflation? What are the risks of house prices falling?’

“And you would look and say, well, house prices never actually have fallen in nominal terms. I remember a piece of analysis showing that mortgage holders in the UK on average had an equity buffer of £60,000 each. Which seemed to be quite cosy. And what I didn’t say was, well, hang on, where’s the money coming from?

“The average mortgage holder had an equity cushion. And you could see the rise in household debt. But that was accompanied on the other side of the balance sheet by rising household assets in terms of housing and shares. So it didn’t look as though the gearing was all that dreadful.”
“I’ll be 70 in September and it’s time to grow up”The wake-up call came, he says, after he had left the MPC and saw an analysis of the building societies: “Suddenly I realised that … two-thirds of all new mortgages in the UK before the bubble were being financed by US money funds. 

“So I was slow off the mark: it was obvious that risk was being mispriced. And it was obvious that there would be some biteback for that. But it never crossed my mind that there would be a bank failure. 

“I’d spent my whole life – and maybe the FT encouraged this – thinking, probably it is a great drama, but actually it’ll be all right in the end. I’d always thought that things worked themselves out. So for me, seeing the news shots of the queues outside Northern Rock was the most shocking thing. Because here was something that shouldn’t have happened. And we hadn’t muddled through; we’d shot ourselves in the foot. With enormous consequences.”


Professional qualifications More qualifications are needed, he says. “This is something that the CISI and others are working on, and I hope that this new body (BSRC) will be able to work with them as well. These qualifications need to have more economic value that they have had recently. It used to be the case that you couldn’t progress in your career, especially on the retail banking side, unless you had them. 

“What would be great is if the qualifications you got from the CISI made you more likely to be promoted and get paid more. So I hope that this new body will be a facilitating organisation, which will bring together the banks and the professional bodies and look for common agendas.

“The professional bodies will have to think hard as well about whether they need to have more ways of disciplining poor behaviour among their own members, for example. Because if you’re going to say a qualification has to have value, it has to be something you can take away.

“I was very impressed by the Salz Review of Barclays Bank, which I think could apply to quite a few banks, and which said that in that hectic period of growth from the mid-1990s to 2006–07, its sense of purpose became a short-term return on equity. And that had the consequences we know about.” What is needed instead “is a sense of purpose that recognises that the people who run banks, in rather pompous words, are custodians of institutions of great public importance in which the public has a legitimate interest, as well as in the profit-earning business.”


His family Married to Harriet, Lambert has “two grown children of whom I’m ridiculously fond, and I’m now a grandfather. Or ‘We are a grandfather,’ as Mrs Thatcher said.” 

His three grandchildren came along quite quickly, “like buses,” he says, smiling. His daughter Caroline is a nurse and has just started a new job at Great Ormond Street Hospital in London, and his son Peter is a film editor, one of whose recent projects was the vampire blockbuster Twilight. 

“We went to see it and you could see everybody in the audience thinking, who are these old geezers, and then at the end, every time Robert Pattinson’s name came up, everybody screamed. And then at the very end, when it said, editor, Peter Lambert, we screamed.” He laughs at the memory.


His plans for a life of leisureSo how is the former Editor of the FT and one-time CBI Director General going to relax in the wake of a flat-out finish to a long career? “I’m going to be Chairman of the British Museum!” He grins and punches the air with both arms. “Lucky me!”

The new position is one of the reasons he didn’t put his name forward to lead the BSRC. The other is “I’ll be 70 in September and it’s time to grow up.”

He is enthusiastic about the performance and prospects of the Museum. “They have over 6.5 million visitors a year. It’s in great shape. It’s got a brilliant director.

“A life of leisure for me lies ahead,” he says cheerfully. But not before he has helped find a chairman and panel for the new BSRC. 

The original version of this article, written by Janice Warman, was published in the June 2014 print edition of the Review.