Don’t bank on it !
The banks can’t keep out of the news. Not only are they ‘too big to fail’ but they are almost ‘too big to find guilty’, despite a new banking scandal breaking nearly every year since 2007.
The latest scandal — the fixing of the rate at which banks lend to each other (London Interbank Offered Rate, or Libor for short) — saw big City names become mud in the space of just a few days.
Already thousands of consumers have moved their accounts from Barclays, the bank at the centre of the storm, and placed them with building societies, mutuals and credit unions, according to lobby group Move Your Money.
This is not the first evidence of bad conduct by the banks. In 2007 they were responsible for wrapping up bad debt in clever packages and flogging them to each other. Cue the credit crisis and the disappearance of some high-street banking names in a frenzy of bailouts, nationalisations and rushed take-overs.
Then, in 2009, the Financial Services Authority (FSA) discovered UK banks had been mis-selling payment protection insurance to consumers, opening the floodgates to waves of ambulance-chasing claims.
From 2011 until now, the European debt crisis means we still don’t know whether Europe’s woes will cause foreign banks to pull out of the UK. Lending has been curtailed; mortgages are being denied; savings rates are pitiable. And now this!
Up to 20 global banks are under scrutiny from US and UK regulators, and the Serious Fraud Office and its US counterparts are considering criminal investigations.
Bob Diamond, the former Barclays chief executive, was once hailed for turning around the fortunes of Barclays Capital. Now he has waived this year’s bonus and lost his job. In a bid to stem public outrage, he will not receive a £20m ‘golden farewell’ from Barclays (although he still nets several million pounds).
Whether or not he knew of the Libor fixing, he was a figurehead of England’s oldest bank (Barclays traces its origins to the late 1600s). Other names have been drawn into the ring. Marcus Agius, chairman of Barclays, Paul Tucker and Mervyn King from the Bank of England have had to face the ire of the cross-party Treasury Select Committee.
George Osborne, Chancellor of the Exchequer, has blamed Labour ministers at Whitehall for colluding with the Bank of England and bankers to manipulate the Libor rate.
But who is guilty? Apparently nobody is to blame; nobody knew anything! And will some resignations and a few waivers of fat bonuses and benefits be enough to let those bankers responsible get away with ‘murder’?
Louis Brook of Move Your Money said, ‘The financial elite is proving once again they are all in this together. We can’t rely on politicians and regulators to fix our broken banking system, when they’re clearly deeply nestled in the pockets of the big banks’.
Labour leader Ed Miliband has called for the banks to be split up and to introduce a code of conduct, but will this be enough for the public?
Alan Miller, co-founder of SCM Private with his wife, Gina, and founder of the True and Fair campaign against opaque charges, agreed that the UK financial services industry is ‘broken’. He said, ‘There is a need for a new framework based on total transparency, rather than empty rhetoric, to rebuild confidence’.
Christian independent financial adviser (IFA) Shane Mullins from Nottingham is trying to do that with his Question of Trust campaign, which has garnered support from the industry and from outgoing Archbishop of Canterbury Dr Rowan Williams.
Credit Action founder Keith Tondeur OBE (see July ET, p.30) is also backing the campaign. However, at Question of Trust’s launch on 10 July, not a single senior representative from the big banks came to hear how the financial services industry can work to restore public and professional trust.
A heart change is surely what is needed, as Arwyn Bailey, spokesman for the Association of Christian Financial Advisers, has declared.
He said, ‘The big issues are collusion and the acceptance of doubtful practices that relegate trust to nothing more than personal gain. We need to rein back a bit and consider the words of one man who said many centuries ago, “Do unto others as you would have them do unto you”.’
The Bible is full of warnings about covetousness. Consider Ahab, who, despite being king of Samaria, dwelling in palatial splendour and owning land as far as the eye could see, wanted yet more. He wanted Naboth’s small family vineyard.
As a result of Ahab’s greed, innocent Naboth not only lost his inheritance but his life (1 Kings 21). Greed causes pain and misery for others, and also consumes the covetous.
But, unless there is a heart change across the City, you can reasonably expect to see more banking scandals erupt in the coming months and years.