Whipping Wayward Bankers Into Shape

Trust in the banks is a commodity in short supply as one misselling or rate rigging scandal seems to follow another.

To outsiders, a cartel of British, European and US banks seem to operate as if they were part of the Wild West frontier where no laws apply and the fastest and slickest gunslinger wins.

In recent years regulators have fined many of the world’s largest banking organisations billions of pounds for infringing the law.

They include payment protection insurance misselling in the Britain, which has seen high street banks pay more than £13 billion in compensation.

The veil of banking secrecy in Switzerland has been torn to shreds as private banks have had to close and UBS and Credit Suisse have buckled under an onslaught from the US Justice Department after admitted advising clients about how to illegally salt away their money and assets without paying tax.

Rate rigging

Now, another group of banks – including Citibank, HSBC, JP Morgan, the Royal Bank of Scotland and UBS have admitted rigging the foreign exchange market. Five have been fined more than £1 billion in Britain alone while further fines are expected in the USA.

Another inquiry is looking into rigging the London Interbank Offer Rate (LIBOR), the rate at which banks lend money to each other and allegations have been made about rigging the spot price for gold on the London market as well.

Regulators are tackling the issues, but the challenge is they have got to get ahead of the game.

All their action is retrospective and is not detecting the wrongdoing at the rotten heart of the banking system today.

Regulators may say talk the talk, but they have yet to tackle the flagrant disregard for rules that bankers and traders display towards the rest of us.

Jail for executives

If an individual attempted to make money by rigging the system, they would face charges of fraud, so one question to ask is why no individuals are brought to book for their criminal actions?

Tracey McDermott, the Financial Conduct Authority’s (FCA) director of enforcement and financial crime, said: “Financial firms should not have any doubt that their free for all culture is unacceptable. This is not about compliance but attitude towards risk.

“Their actions blatantly put the markets at risk and lead to others losing money. We expect firms to apply the lessons they should learn from fines and regulatory action across their businesses to stop these events happening.

“If they don’t they will face further regulatory and reputational costs.”

Perhaps jailing the senior executives of offending banks would focus their minds on controlling their wayward staff.