Derek Pain: The old City: sexist, cosy, easy - but certainly not a cesspit


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The Independent Online

When I started chronicling the behaviour of the City in the 1950s I felt there was something of a gentlemen's club about the place. It was cosy and male-dominated. Today, in contrast, the word cesspit is often used to describe what is still Europe's premier financial centre.

I am not suggesting that scandals were unknown in those distant days. Among those to hit the headlines were non-existent gold mines and a number of financial upheavals, which occurred – thankfully – not too frequently. Of course in the more free and easy days that then existed there was every chance that underhand escapades were not even noticed. Many ploys that are now offences, such as insider trading, were not only tolerated but encouraged. I recall one cabinet minister referring to the "games gentlemen play in the City".

So many activities accepted then have since been banned. Gradually the City became more transparent. The Takeover Panel was established, the Stock Exchange tightened rules and the male-only club was breached when women were allowed on to what was then the Stock Exchange floor where most business was conducted.

Merchant and high-street banks, stockbrokers and jobbers were separate institutions, although there was probably some integration.

The City drifted on, embracing the occasional scandal, and giving up much but not all of its cosiness. Then in 1986 came the "big bang" which revolutionised trading. It occurred a few weeks after The Independent was born. Regulations that had existed from time immemorial were abolished, among them fixed commissions, the distinction between brokers and jobbers, and the replacement of open-cry on the floor of the Stock Exchange by electronic trading. Quickly the old order disappeared. Long-established brokers and jobbers were absorbed by big financial institutions, with many falling to foreign groups.

Amid the "big bang" excitement the seeds were, I believe, sown that have led to the "cesspit" cry heard today. Before 1986 the high-street banks were not noted for excruciating behaviour. Perhaps some of the fringe banks were, but certainly not the respectable Mr Mainwaring branch networks.

Yet these days the banks and other financial institutions are plagued by a multitude of major scandals such as payment protection insurance, allegedly fiddling foreign exchange and interest rates, and secret share trading. Such misdeeds are costing a fortune in fines and compensation. I expect there could be other yet undetected disasters.

And, of course, bankers, with more than a little help from politicians, were largely responsible for the financial crisis that engulfed the world and from which many countries are still suffering.

No wonder there are calls for prosecutions. After all, the culprits seem to have got off scot-free.

Yet I wonder if the collective financial scandals would have occurred in the old days. "Big bang" and the use (or misuse) of computers played a large part in what looked like the near-destruction of the financial system and the accompanying scandals. I suppose technology is to be welcome, but it creates havoc in the wrong hands. And it is not only the financial sector that is exposed to misuse.

Call me an old fuddy-duddy but I preferred the days when brokers were brokers, jobbers stuck to wholesaling shares, and bankers were untainted. The City was then a much more leisurely place. There was the odd crook around, but in those far-off days when I started writing the world was a much more simple place. Technology has produced many benefits, but it has much to answer for.

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