Margareta Pagano: Why didn't the watchdog bark as Libor alarms were sounded?

Midweek View: It’s pathetic to say the FSA didn’t have the powers; of course it did, but has failed to use them properly

A Barclays board director once told me, a few years before the financial crash, that if the investigators from the Financial Services Authority who visited the bank for regular check-ups showed any flair, they would hire them. But if they weren't up to scratch, they would run rings around them.

His remarks say much about the City's cynical attitude to the FSA but even more about the quality of the people who have, and do work for the regulator. If you look back at the FSA's stewardship of the City over the past few years, before and after the crash, you have to question what on earth the top bosses were doing as they have missed scandal after scandal; Northern Rock, PPI mis-selling, Libor and the mis-selling of interest rate swaps to small businesses to name a few.

That's why it wasn't enough for Lord Turner, at the FSA's annual meeting yesterday, to denounce the investment banking industry for its "cynical greed": we knew that, that's what drives them and always has, and it's why we are supposed to have regulators such as the FSA to rein in the greed. And frankly, his comment that the Libor scandal has come as a "huge blow" to the banking industry's reputation is so self evident as to make you cry.

Lord Turner also demanded action to "purge the industry of the culture of cynical entitlement which was far too prevalent before the crisis". But isn't that his job? Why didn't he take the action he is calling for before? It's pathetic to say the FSA didn't have the requisite powers; of course it did, but has failed to use them properly or to pass on its concerns. Talk about stables and all that.

It's not what you would expect to hear from the UK's top regulator, who was in charge when the Libor racket was in full swing.

It's no surprise Douglas Carswell MP, not one to mince words, slammed Turner's FSA as "monumentally useless" yesterday. But he also asked why it was US regulators, after US newspaper reports, which investigated Libor in London even though the FSA has 6,000 pages of rules.

It's the right question and to those who say this is not fair – that the FSA didn't regulate the Libor fixing – the reply is that the FSA was warned on many occasions that something odd was going on in the interbank market.

There were certainly enough questions being asked for it to have picked up on what was happening, or at least to pass on concerns to those who should. Bloomberg was the first, carrying an article in 2007 asking why was it that Barclays' Libor submissions were the highest of all the banks. Doesn't Lord Turner read the newspapers? You would expect that after Bloomberg, and then more reports in the Wall Street Journal, that the regulators would start digging. The fact that the FSA didn't backs up much of the criticism against it that regulators were asleep on the watch, had become box-tickers rather than sniffer-outers.

We also know now there were whistle-blowers at Barclays who took concerns to the British Bankers' Association and to the FSA in December 2008. According to the US Commodity Futures Trading Commission, a senior Barclays Treasury manager told the BBA he believed the Libor panel banks, including Barclays, were submitting rates that were too low. An internal Barclays email following one of these conversations shows the Barclays manager told the FSA that Libor "settings seemed incorrect". Who at the FSA received that email, and what did they do with the information?

There are similar questions now being asked of the Bank of England, following Bob Diamond's decision to air his conversations about Libor setting with the deputy governor, Paul Tucker, in public.

It's going to be fascinating to hear Mr Diamond give a fuller account at today's Treasury Select Committee. Will he claim the BoE and the FSA knew what was happening; that they colluded to show the banking system was healthier than it was? Or will he hide behind his lawyers for fear of pending legal action?

Neither Mr Diamond's exit from Barclays, nor Lord Turner's limp defence of the FSA, are enough to restore trust in the banks. Both put themselves up as poster boys of their industries and are now sheltering behind excuses, in Mr Diamond's case that he was acting on orders from on high and, from Lord Turner, that he didn't have the right powers to launch his own Libor inquiry. What is interesting is that the public has got the biggest nose of all, and has shown it can sniff out injustice.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'