Chris Blackhurst: The rewards are too high for banks to change their ways

Midweek View: More and more the banks come to resemble recalcitrant teenagers sneering and saying 'whatever' every time an attempt is made to bring them back into line

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The Independent Online

Another week, another round of giant penalties due to be imposed upon the banks. And another bout of collective shrugging in the City.

More and more the banks come to resemble recalcitrant teenagers sneering and saying “whatever” every time an attempt is made to bring them back into line.

At the weekend, I was contacted by the PR for one of them who questioned if I would ever write something positive about his bank. Today, his is one of the six expected to be hit with a combined billion-pounds plus fine for rigging the £3 trillion-a-day foreign exchange market.

That’s the Financial Conduct Authority’s penalty. Then there are the punishments from the US Commodity Futures Trading Commission and Switzerland’s regulator, Finma. By the time they’re all done, the fines could be running into several billions. It’s possible there may be a delay – but that’s not got anything to do with the guilt, more with the level of settlement.

The banks will pay up – they get reductions for settling quickly – and move on. Forex, which follows hard on the heels of Libor manipulation, will be marked down as a bad episode, presumably if the spin doctors have their way, to be quickly forgotten.

The fact it joins a long roll-call of shame will also be glossed over. As will the next incident and the one after that. Because there will be further instances of appalling behaviour.

The bankers themselves are admitting as much. They’re now too vast, too complex, too unintegrated, to regulate – and to manage. The latest interim statement from Britain’s biggest bank, HSBC, for instance, ran to 32 pages. In August, for its half-yearly results, the bank published 293 pages.

That’s for external consumption. What the bank’s own, internal accounts resemble does not bear thinking about. The chances of something lurking in there must be high.

They’re so unwieldy, and what they’re trading is so unfathomable to anyone but an expert, that the banks’ bosses have taken to pot luck – to picking an area that statistically at least might be worthy of investigation.

As a bank executive said: “With tens or hundreds of millions of accounts on your books, how do you know where to look? Something will always slip through even the tightest rules when you manage the firm with statistics rather than relationships. A computer system or spreadsheet won’t tell you if something smells bad. But to cut costs we have to do it this way. Fines just become part of the cost of doing business and you just assume that there will be more to pay in future.”

At Royal Bank of Scotland, it was said that only five people in the bank fully understood what the bank was doing – and they did not include Fred Goodwin. Certainly the bank’s non-executive directors were not among them.

Goodwin and his board colleagues of course should have made it their business to know. But even so, it makes a mockery of attempts by the regulators to apply more stringent controls. The rewards are so high, the risk of being caught so small, and the number of operations and employees so enormous that someone somewhere will be tempted.

What are the solutions? Jail as well as fine; don’t negotiate but throw the book at them; shift the culture so that fellow staff, clients and shareholders are respected not exploited; end taxpayer-funded bank bailouts (something that the Bank of England’s Governor Mark Carney, in his capacity as chair of the Financial Stability Board, is doing) and make the banks smaller, more manageable and transparent.

In the meantime, get ready: another scandal is just waiting in the wings.

Vodafone and broadband – is a marriage on the cards? 

On 1 January 1985, Ernie Wise made the first mobile phone call, from St Katherine’s Docks, near Tower Bridge in London, to Vodafone HQ in Newbury.

Since then, an entire industry has been born, enjoyed fantastic growth, become the sexiest business around (remember when Vodafone hogged the Footsie?) and sunk back again. First, handset manufacturers, led by Apple, eclipsed them. Then Google and Facebook left them standing.

The creaking sound accompanying the announcement that Vodafone is going to provide residential fixed-line broadband next year was of a wheel turning full circle. In more ways than one: Vodafone used to have fixed-line broadband which it sold to PlusNet in 2011.

Here we are again, and Vodafone is returning to the market. This time, though, it’s back to the future with a difference: Vodafone is going to exploit the whopping 20,000kms of fibre network it bought in acquiring Cable & Wireless three years ago.

It’s no coincidence that just as Vodafone moves into fixed line so does BT head into mobile. They’re both blurring into each other; they’re becoming utility suppliers.

Of course, their respective supporters will say that’s not true. Vodafone will maintain its broadband and 4G are quicker and more reliable; BT has gone down the content route, offering football and the rest to its subscribers.

In truth, though, the industry’s main players are coming together, selling almost identical “quad” packages of home phone, home broadband, mobile and TV.

In that, they’re like the energy companies supplying gas and electricity. Except the telecoms firms are offering theirs four ways. But they’re becoming utilities nonetheless.

The danger for Vodafone in all this is that it gets caught, that it’s neither the cheapest nor the fastest (a new entrant may promise something even quicker) and it lacks the glamour of a BT or a Sky with their sport and movies. To look across to another sector, Vodafone could end up being a Tesco or a Sainsbury, marooned between the discounter kids on the block in Aldi and Lidl, and the established, upmarket Waitrose.

To counter that prospect, Vodafone may team up with a content creator, with Sky being the likeliest bet. But Sky does not strike cheap bargains; it’s a ferocious competitor.

There are four mobile operators in the UK: Vodafone, O2, EE, and Three. And four large fixed-line firms: BT, Sky, Virgin, and TalkTalk. The case for consolidation, for those eight reducing in number is unassailable. What money for a Sky-Vodafone merger?

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