Monday, 2 July 2012

More than beheading required

It’s not so very long ago that we were being told that the UK’s top bankers had such ‘scarce and sought-after’ talents that they had to be paid huge salaries and bonuses for fear they might take those talents and abilities somewhere else.  It turns out that the immense talents being rewarded amounted, in some cases, to an ability to win when gambling with dice that they themselves were able to load.  It’s the sort of talent which, in any other walk of life, would be rewarded by a spell as a guest of Her Majesty rather than by a large bonus.
The spectacle of the big cheeses at the top of Barclays trying to hang on to their positions when everyone outside the banking sector can see they have become untenable is unedifying.  Their behaviour is not unusual, however – we’ve seen often enough in the past that people can have difficulty taking a sufficiently objective view of what they’ve done.  And that hasn’t been restricted to bankers - it's not dissimilar to some of the noises that we heard from MPs when the expenses scandal was at its height.
I’m sure that heads will be rolling before too long, and no doubt some will take pleasure in seeing them roll.  It’s not enough though – and there’s a danger that seeing off a few miscreants will be enough to remove the matter from the front pages.  Part of the problem is that the heads that roll will be replaced by other heads, and the probability is that the new heads will be drawn from the same small pool.  (After all, all those involved believe that the necessary talents are ‘scarce and sought-after’, don’t they?)
Does anyone really believe that the practices exposed last week were confined to one bank?  I, for one, don’t - and the news today that RBS had sacked some staff involved in similar activities confirms that it's more widespread than a single bank.  Staff in the banking sector move effortlessly between employers – at its worst, this means that those who screw up for one institution simply get appointed by another.  And the language in which some of the published e-mails were couched makes it clear that those involved thought that what they were doing was perfectly normal, and could see nothing wrong with it.
The Governor of the Bank of England has called for a culture change in banking.  That’s a bit better than merely removing a few heads, but I doubt it will be enough either.  Chris Dillow suggested last week that banking, by the nature of the beast, attracts precisely the sort of people who are likely to chase the money, regardless of morality.  Even were there to be an influx of new people coming in, it's more likely that they'll be swept up by the existing culture than that the culture will change.
In an editorial on the subject last week, the Western Mail suggested that it is ‘human nature’ to exploit weaknesses in the system for personal benefit.  I’m not convinced about it being the nature of all of us; but certainly for those driven first and foremost by personal greed, it’s a fair comment.
In any event, neither chopping off a few heads nor standing on the sidelines demanding culture change is likely to have anything other than a very short term effect.  The sector needs tighter and stronger regulation to ensure that it behaves in the interests of the economy and society as a whole. After all, if 'we didn't break any rules' is part of the line of defence, then changing those rules has to be part of the response.
We’re unlikely to get that, though.  It was notable that Cameron claimed a huge victory last week when he kept the UK out of the proposed new EU banking regime; a regime which might actually have helped by setting some common standards across the EU.  He'd sooner keep the UK out of tighter regulation in order for the bankers to make money at the expense of those who impose tighter regulation.  He, and his friends and donors, have more to gain by a bit of moral condemnation now followed by a swift return to business as usual.


Anonymous said...

As long as parties get funded by the City, in the Tories case its 25% of party income, Labour less since it lost office then and Lib Dems less again.

There is not only no incentive for change, but no until another sector can match the tax take to the Treasury of the city then politicians won't reform banking practices or tell them were to get off.

Spirit of BME said...

Chinese Walls are great in theory and economic books, but in the real world they never work.
The culture of “ Dudeism” is the curse of all males with genitalia and no inquire is going to sort that out, but what is interesting is the way state media has reported these events ,selling the idea that HMG can do something about this sad saga.
I suspect that last weekend intermediaries from the Banks and HMG met to agree on how much “noise” politicians are going to make and agree that any new law will not be retrospective and if any are caught by the current law, then it will only apply to the lower ranks. The Banks will clearly remind them that they (the City) are the goose that ensures the British State functions and economically survives.
HM Loyal Opposition reaction has been interesting, as reports suggest that most manipulation was to depress LIBOR during the crisis, so, were there any signals from Balls, Darling and HM Treasury during those hectic times? Demanding a three year inquiry would help their case of kicking it so far down the road when it did report the world would have moved on.
The issue might in time move on to another industry that sets the price of fuel in the way Platts indices are established on an hourly basis and determines how much money leaves our pockets or how much government taxes are collected when we fuel our cars.- Of course I know nothing about that.

John Dixon said...

Platts indices? Fuel price fixing?

"Stay, you imperfect speaker! Tell me more!"

Spirit of BME said...

Ah, the markets has bubbles ,as does the water.