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Can private banks ever be trusted, after fines of £61n?

Trust me I'm a banker - BBC ScotlandThe size of the penalties imposed on the UK’s Big 4 banks for illegal misconduct since the crash in 2008-9 is stunning. It amounts to £42bn already levied up to 2014, plus a further £19bn for conduct and litigation charges this year and next. That £61bn total is a staggering figure, equal by one measure to 4% of Britain’s entire GDP and by another well in excess of levies imposed for BP’s oil rig disaster in the Gulf of Mexico. KPMG have also estimated that these 4 banks have paid 60% of their profits since 2011 in fines and repayments to customers. Huge though these figures are, they still conceal three important points that indicate the need for radical reform.

First, none of these colossal fines relate to the banks’ recklessness, particularly in respect of the sub-prime fiasco, which precipitated the financial crash. The mismanagement was on such a scale, especially in terms of the world-wide dissemination of exotic derivatives (diced and sliced as collateralised debt obligations which were highly profitable) and had such devastating global consequences that it is extraordinary that this, the most reprehensible aspect of the banks’ misconduct, has still not been punished. But is does raise the question as to whether private banks, with such a record and now without any remorse shamelessly demanding a return to business as usual, can ever be trusted again in a private market they regularly and ruthlessly abuse.

Then, despite the whopping size of these fines, there is little or no evidence of any significant change of culture within the banks. The lesson is obvious, the misconduct and irresponsibility lies with the top management, but the fines were paid by the shareholders. There is no incentive here for the chief executive and board of directors to make any radical change. That will only happen when they are prosecuted and, if found guilty, jailed for a stiff term – after all these profit scams involve sums a million times greater than the benefit cheats who fiddle by comparison small potatoes.

Most worrying of all, the credit rating agency Standard & Poor’s has commented that “We think that conduct and litigation charges are now a ‘way of life’ for the UK banking industry, and that some form of charge seems probable every year for the larger banks”. This is a statement of bare-faced complacency. If it is true, and it may well be, it exposes the banks’ culture as rotten to the core and one from which they have no intention of escaping. There could not be a clearer statement of the immorality, lawlessness and resistance to change of the big 4 banks, nor a more compelling argument that their corruption will only be fundamentally remedied by the

2 Comments

  1. David Pavett says:

    What happened to the end of this article – it stops mid-sentence?

    The headline £61n is presumably meant to be £61bn

  2. Barry Ewart says:

    I think we may all be getting a bit tired desperately trying to get this horrible Tory Govt out! WE NEED A GOVT WHICH TREATS PEOPLE BETTER!
    And the threat of £30b more of cuts, more privatisations in the NHS etc!
    I”m voting for Moses Miliband and the Edstone is hilarious generating tons of publicity.
    Disappointed a little though, was in the middle of sculpting one for tthe Tories which read:
    . I DON’T KNOW WHICH SCHOOL CAMERON WENT TO BUT AT MY COMPREHENSIVE THEY TAUGHT ME THAT £153b -£60b IS NOT HALF!
    . DOES ED HAVE COPY OF THE LETTER OF RECEIPT FOR THE £50M DONATION BY HEDGE FUNDS TO THE TORIES AND THE LETTTER OF APPRECIATION BY HEDGE FUNDS FOR THEIR £145m TAX CUTS?
    . WAS THE RECENT PUMPED UP CAMERON BEING COACHED BY HYPNO THE DOG?
    Humour may help sustain us for the last push.
    Yours in solidarity!

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