About 26 years ago came ‘The Big Bang’ – no, not the one that created the universe, but Margaret Thatcher’s deregulation of the stock market, unshackling the City – a banker told me, ‘This means we’re free to go shooting fish in a barrel.’
Thatcher wasn’t wrong: the London financial market was in danger of being overrun by New York and the ‘Old Boy’ bowler-hat brigade had a comfy, Corinthian attitude to doing business amongst themselves, to the exclusion of real talent. Nepotism ruled, brains took a back seat.
However, with every revolution, good comes hand in glove with bad. So fast forward a few years and the can of worms known as the Pension Mis-selling Scandal exploded into the headlines, after unscrupulous middlemen chivvied many financially-naive workers into switching from safer, better-performing company schemes into ‘private’ plans that promised punters less and sellers fat commissions.
The scam wasn’t redressed until after 2000, when the Financial Services Authority stepped in and hundreds of thousands of mis-sold victims were rightly recompensed.
For the first time the ‘fish in the barrel’ had some teeth to bite back.
I cite the example to underscore the greedy, grasping, amoral culture that started with Thatcher’s Big Bang and continued to fester in the City, under the wilful connivance of generations of banking bosses, whose chief aim has always been to make a fast buck.
Using deliberately arcane jargon, their institutions created products so intricately complex – like derivatives and insurance credit default swaps – one banker admitted to me not so long ago, ‘Sometimes we don’t even understand them ourselves and our customers take it on our say-so they’re all right.’
The US sub-prime mortgage travesty, which saw the collapse of Lehman Brothers, should have heralded a long-overdue rethink by regulators and a thorough cleansing of the international finance industry’s Augean Stables. But efforts were feeble, largely due to the omnipotent power of the banks.Hence we’ve witnessed a floodtide of scandals, one of the latest being the scam to manipulate the London Interbank Offered Rate (Libor), for which Barclays were fined £290M, peanuts of a penalty in terms of their uber-rich coffers.
And, just emerging, is news of yet another scam, with banks – chiefly Barclays (yet again!), HSBC, Royal Bank of Scotland and Lloyds Banking Group – arm-twisting small business clients into buying complex products, supposed to offer protection against rises in interest rates, without the customers fully grasping the downside risks.
None of these are victimless crimes and, as Bank of England head, Sir Mervyn King, described them, ‘deceitful manipulation’.
We need banks to provide money at reasonable cost, the lifeblood of any economy. What we don’t need is banks acting like shysters, whose personnel, from the CEO down, net obscenely huge, annual bonuses for dreaming up scams to fatten their institutions’ balance sheets and bolster their share price.
The way to stop this serial malpractice is not by a Leveson-style inquiry or wrist-slapping fines, but for boardroom heads to role – as in the case of Barclay’s Bob Diamond, who had the chutzpah to tell a Common Treasury select committee in January, 2011, ‘There was a period of remorse and apology for banks, that period needs to be over.’
It’s clearly not. And only the fear of prosecution and jail will threaten to curb the greedy excesses of amoral bankers.