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
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
filmIdris Elba responds to James Bond rumours on Twitter
Arts and Entertainment
Ellie Levenson’s The Election book demystifies politics for children
bookNew children's book primes the next generation for politics
Arts and Entertainment
Lena Headey as Cersei Lannister in Game of Thrones
film
News
i100
Sport
Yaya Sanogo, Mats Hummels, Troy Deeney and Adnan Januzaj
footballMost Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?
Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

Finally, a diet that works

Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced
Say it with... lyrics: The power of song was never greater, according to our internet searches

Say it with... lyrics

The power of song was never greater, according to our internet searches
Professor Danielle George: On a mission to bring back the art of 'thinkering'

The joys of 'thinkering'

Professor Danielle George on why we have to nurture tomorrow's scientists today
Monique Roffey: The author on father figures, the nation's narcissism and New Year reflections

Monique Roffey interview

The author on father figures, the nation's narcissism and New Year reflections
Introducing my anti-heroes of 2014

Introducing my anti-heroes of 2014

Their outrageousness and originality makes the world a bit more interesting, says Ellen E Jones
DJ Taylor: Good taste? It's all a matter of timing...

Good taste? It's all a matter of timing...

It has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Olivia Jacobs & Ben Caplan: 'Ben thought the play was called 'Christian Love'. It was 'Christie in Love' - about a necrophiliac serial killer'

How we met

Olivia Jacobs and Ben Caplan
Bill Granger recipes: Our chef's breakfasts will revitalise you in time for the New Year

Bill Granger's healthy breakfasts

Our chef's healthy recipes are perfect if you've overindulged during the festive season
Transfer guide: From Arsenal to West Ham - what does your club need in the January transfer window?

Who does your club need in the transfer window?

Most Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
The Last Word: From aliens at FA to yak’s milk in the Tour, here’s to 2015

Michael Calvin's Last Word

From aliens at FA to yak’s milk in the Tour, here’s to 2015