Tagged with Regulation

Why are UK regulators so soft on British banks?

Banking trade screensThis week the Swiss bank, Credit Suisse, was forced by the US Department of Justice to pay a fine of $2.6bn for its secret activities in enabling its US clients to evade US  taxes. Ever since 2009 when UBS buckled under pressure from US prosecutors and agreed to pay $0.78bn in fines and to pass on information about tax-evading US citizens, there has been a steady increase in information-sharing by banks with the tax authorities. This week the thumbscrew was turned tighter, not only by the magnitude of the fine, but even more by forcing Credit Suisse to admit criminal culpability.

While UBS was given the soft option of a so-called deferred prosecution agreement which avoided the taint of criminality, 5 years later the Swiss bank if taking the full rap for these offences. It is being severely (and rightly) punished for allowing (or abetting) its bankers in concealing its US clients’ assets in a conspiracy that extended for decades, and because its staff actively hindered investigagtions aimed at uncovering it. Continue reading →

Bankers back to business as usual

Two articles of faith in the banking class is that regulation always undermines growth and that financial crises are inevitable. Both these claims are wrong and cannot be supported by the evidence of the last 70 years. On the first, it was the absence of regulation which precipitated the epic 2008-9 breakdown. Starting from 1971 when Nixon scrapped the US dollar’s link to gold, deregulation rapidly gathered pace with the removal of currency and interest rate controls.

Banking crises, absent in the previous era, quickly returned with the collapse of the Herstatt bank in Germany in 1974, the demise of the Mafia-linked Franklin National bank in the US, and the fringe banking crisis in the UK in the mid-1970s. By the 1980s all the dodgy denizens in the financial zoo had been uncaged and roamed free into any financial niche that took their fancy. Various financial catastrophes followed, peaking in the enormous credit crunch and global collapse in 2008-9. So why are the government, let alone the banks, so anxious to resurrect a system that is a sure-fire loser? Continue reading →

Why banks power to create money should be regulated and directed (but not ended)

Banking trade screensAnn is author of “Just Money: how society can break the despotic power of finance”, published by Commonwealth, 2014. 

The Financial Times is hosting a major debate on whether the private banking system should be allowed to continue creating 97% of the credit or money circulating within the economy. Martin Wolf, its respected economics commentator, supports the ‘Chicago Plan’ that effectively calls for private banks to lend out only as much as they have in “reserves”: “Banks could only loan money actually invested by customers.” Private banks would be prevented from creating money, and instead all money would be issued by the state. The quantity issued would be decided by an independent committee as argued by amongst others, the IMF’s Kumhof and Benes and Positive Money. Continue reading →

Watchdogs? More like dormice! Time to make them sackable

Regulating the regulators?Two contemporary cases highlight perfectly how accountability has become a byword for impunity. It is almost incredible that Paul Flowers, the disgraced former chairman of the Co-op Bank, was appointed after one 90-minute interview, even though he was a financial illiterate (he estimated the bank’s asset base at £3bn when actually it is £47bn) and had disclosed a criminal conviction. His appointment was waved through by a member of the FSA (Financial Services Authority) who did not bother to quiz Flowers’ 1981 criminal conviction for gross indecency on the grounds that it was irrelevant to the role of bank chairman! Continue reading →

The Coop group is in a mess: deal with it

coopI’m angry that the Co-op group is in a mess.

As a member I have been let down.

As a customer of the bank they’ve failed me.

As a believer in the co-op approach to business I am disappointed that flagship co-op has failed so many other successful co-ops by its actions.

I am annoyed that an individual can be allowed to do so much harm.

But let’s be clear about what I’m most annoyed about, and that’s that the Co-op Group let itself be used. Continue reading →