Two years ago, the then chief executive of Barclays, Bob Diamond, told the British public that the time for “remorse” for bankers was over. We begged to differ.
The time for remorse or, for that matter, for forgiveness, was nowhere near. Not when those at the top of our banks were still earning vastly inflated pay packets. Not while those who helped wreak such havoc on the British economy and people’s livelihoods were still enjoying the rewards of their disastrous careers, and not while Mr Diamond’s own bankers were still, as we subsequently learned, cynically rigging the key Libor rate to boost their bonuses.
This week one of the alleged Libor miscreants was charged with conspiracy to defraud. This charge, which carries a custodial sentence, was lodged under laws that have been around for a lot longer than the jury members who will decide his fate. And for those doubtful about the parliamentary Banking Commission’s key recommendation this week – for legislation making it easier to jail senior bankers – that is a crucial point. Laws already exist. It is not a good idea to make a special case for one industry.
The doubters are wrong, however, on many other fronts. Despite actions that have cost billions of pounds of taxpayers’ money, no senior bank executive has yet been tried, let alone jailed, for pulling what may have been collectively the biggest fraud in the history of capitalism. Such a statement cannot be made, or even countenanced, about any other industry. The perception that justice remains undone has broken the link between the banks and the community they are supposed to serve.
The total absence of bankers in handcuffs reflects in part a lack of will on the part of prosecutors. But their reluctance in turn reflects the difficulty (and expense) of proving that any one person was criminally negligent. Time and again the Commission heard bankers testify along the lines of “not my job, Guv”. You can see why prosecutors hesitated.
The conclusions of the Banking Commission have much to recommend them, not least because they would create structures and accountability within banks that would make prosecutions possible in the future. Whether bad bankers are actually jailed or not, however, the hope must be that the very real threat of a three-year stretch would discourage the taking of irresponsible risks in the first place and ensure that senior executives understood what was being done on their patch. Peripheral though it might seem, the idea that more women on the trading floor might reduce the risk-taking should also be taken seriously.
Critics object that such measures could lead to a culture of playing safe. We would argue that such a change might be no bad thing. With the number of unregulated territories overseas becoming fewer as countries tighten up their banking regulation, it is not unreasonable to hope that if the UK managed to reinvent itself as the world’s most trusted and responsible environment for financial services, more businesses might be drawn to work here. The effect does not have to be negative.
The real danger now is not that the Commission’s recommendations stand to harm British banking – the industry has done enough damage to itself unaided – but that the proposals will be watered down, or even shelved, because of opposition from the banking industry. We have waited too long to see a report that will make banking truly better. The Government must ensure the medicine stays strong.