Editorial: Harsh winds must blow through the City


Related Topics

If there were those in the financial-services industry who thought – four years after the collapse of Lehman Brothers – that the pressure for reform might be abating, they could hardly be more wrong. For all the efforts so far, the work of restoring trust in Britain's banks has barely begun.

Ed Miliband's tough talk at the weekend was, therefore, half right. In fact, the Labour leader's threats to introduce modern-day "Glass-Steagall" legislation to split banks' retail and investment operations can largely be chalked up to politics. On the eve of his party conference, with commentators and potential voters alike clamouring for policy details he will struggle to provide so far from an election, Mr Miliband's broadside against the banks ticked all the boxes. By tilting at so unpopular a target and – ostensibly, at least – fleshing out his nebulous (if appealing) notion of "responsible capitalism", his remarks were a fine entrée for tomorrow's big speech.

In fact, with new laws obliging banks to "ring fence" retail deposits already in the works, Mr Miliband's fulminations are more rhetorical flourish than actual policy. But his counsel against back-sliding is still valid. There has been some softening of Sir John Vickers' proposed reforms to ensure the taxpayer bailouts that followed the financial crisis need never be repeated. The changes may not be the wholesale sell-out that some suggest, but with the consultation period only this month concluded and the final legislation not due until 2015, the banks are still lobbying hard. The Chancellor must resist further concessions.

Nor is Vickers all the banks have to worry about. Martin Wheatley, the head of the new Financial Conduct Authority, is also no push-over. Fresh from the triumph of his plans to reform the Libor benchmark rate – published to much commendation last week and now to be taken up globally – Mr Wheatley warns in this newspaper today that the finance industry has "a big wake-up call coming". He vows to crack down hard on abuses, with commodities markets an early priority.

Mr Wheatley's zest and commitment can only be applauded. Ultimately, however, neither he, nor Sir John, nor even the Chancellor (whether Conservative or Labour) can do all the heavy lifting required. The heart of the problem is one of culture, and, as such, it must be met by the banks themselves. The good news is that, even within the industry, the pressure is building. If 2008 was the year the bubble burst, 2012 is shaping up to be the one in which banks are finally forced to acknowledge the gory details of their culpability. Month by month, the evidence of a truly rotten culture piles up. The "London Whale" trader who apparently lost JP Morgan $2bn (£1.2bn), the mis-selling of payment-protection insurance, the Libor-fixing scandal, money laundering claims at HSBC, alleged sanctions-busting at Standard Chartered; the list goes on.

There is some evidence that the penny is dropping, at last. The new Barclays chairman is to change the bank's pay structure so that sales are not the only yardstick and the new chief executive is pruning the most controversial tax unit. Meanwhile, Royal Bank of Scotland's Stephen Hester has warned it could take a generation to change the culture of his industry, but at least he recognises the need to do so.

A start, then, but a most meagre one. Now other banks must follow their lead, and not only when caught out by scandal. Ring fences, even forced separation, are not the only answer. It will take the Vickers reforms, the zeal of Mr Wheatley, and concerted effort from bankers themselves to sweep the Augean stables clean. Are they ready?

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Sheridan Maine: Accounts Assistant

£30,000 Annual: Sheridan Maine: A fantastic opportunity has arisen for a perso...

Sheridan Maine: Accounts Payable Clerk

£21,000 - £24,000 Annual: Sheridan Maine: Are you looking for a new opportunit...

Recruitment Genius: Regional Sales Manager - East Region - OTE £45,000

£30000 - £45000 per annum: Recruitment Genius: This is an exciting opportunity...

Sheridan Maine: Finance Manager

£55,000 - £65,000 Annual: Sheridan Maine: Are you a qualified accountant with ...

Day In a Page

Read Next

I might be an MP, but that doesn't stop me fighting the patriarchy with my breasts

Björt Ólafsdóttir

Daily catch-up: opening round in the election contest of the YouTube videos

John Rentoul
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor