Amongst the clarion calls for higher professionalism, one consistent theme is heard from the lay observer. Why did so many of the leaders of the troubled banks not possess banking qualifications?

The recognition that this sector, with its baffling array of complex financial products and instruments, may be led by people who do not understand them caught the attention of the Treasury Select Committee when it first investigated Northern Rock.

It emerged again in last month’s hearings of current and former Chairmen and CEOs of leading financial institutions. One of the items consistently picked up on was the silence when these erstwhile leaders were asked to comment on qualifications.

Examinations became discretionary in some parts of the sector

The Securities & Investment Institute led a determined, but ultimately unsuccessful, campaign in 2006 to avoid the wholesale banking qualifications becoming discretionary. In November 2007 the former requirement to hold recognised approved benchmark qualifications for those advising on trading/managing investments for institutional clients was abolished.

However, the vast majority of banks chose to carry on using qualifications because they realised that qualifications, widely recognised as a benchmark, externally set and assessed by a third party, are the most cost effective means by which minimum standards can be safely satisfied.

The problem is that once qualifications become discretionary, those firms or networks who look for short term cost savings reduce their training and examination requirements.

The FSA’s current Retail Distribution Review is, however, a really positive step from the regulator in recognising the importance of compulsory higher level examinations in this part of the sector.

Why are examinations needed?

An examination is a serious and objective test, set and marked by a respected third party. In the world of work, where financial practitioners seek recognition as professionals, an examination offers a clear line distinguishing those who have at least achieved a minimum threshold of knowledge and understanding to equip them in their work.

An examination set and assessed by independent practitioners, through professional bodies, assures stakeholders that the organisation setting the examination is committed to ensuring that each individual candidate has to demonstrate in a secure, invigilated environment that they have achieved this standard and that they have not hidden behind the high reputation of their firm, or of their colleagues.

Until 2005, the FSA directly managed the list of Approved Examinations and there were strong links between the FSA and professional bodies. When the FSA delegated the management of examinations to a new organisation (the mainly government funded Financial Services Skills Council) the link was weakened.

The new arrangements enabled firms to develop their own ‘appropriate’ examinations in-house, providing that these met the FSSC examination standards. However, although a number of firms carefully considered this option, they soon recognised the complexity and academic rigour needed. As a result, firms continued to use examinations offered by professional bodies operating at depth in specialist areas of financial services.

Firms still demonstrate their strong support for qualifications that are practical and rigorous by providing hundreds of volunteers to assist with the curriculum and syllabus development of individual examinations that bodies like us offer.

Against the backdrop of deep public unease, the case for examinations to be set by a respected third party, through practitioners, associated with organisations committed to the professionalism of individual practitioners, has never been greater.

Examinations are a core, but initial, part of professionalism. This Institute stands for helping people attain initial competence through rigorous examinations, combined with maintaining that competence through a range of activities which can also include higher level qualifications and where the crucial component of promoting trust permeates all that it does.