Brian Wilson: Let’s put bad bankers in the dock

WE’RE told that Barclays’ misconduct was ‘serious and widespread’, so let the courts deal with it, writes Brian Wilson

Bob Diamond, alas, never received his knighthood. Possibly this oversight was due to him being an American citizen, though they do hand out “honorary” ones in these circumstances to the great and good – or, more usually, bad.

Anyway, since he doesn’t have one, it is impossible to take it away, as happened to poor Sir Fred. In the absence of this sanction, might I suggest another. Put a seal on Barclays headquarters and go through every piece of evidence with the finest-toothed of Metropolitan combs. Then put the people responsible for this latest banking scandal where they belong: in the criminal dock.

According to the Financial Services Authority, “Barclays’ misconduct was serious, widespread and extended over a number of years”. It threatened to undermine the integrity of the interest-rate process, “which is of fundamental importance to both UK and international financial markets”. Barclays has already admitted to US regulators “attempted manipulation and false reporting”. Quite a charge sheet, and that is only for starters.

The Serious Fraud Office is now investigating and is expected to report within a month. Already, fines totalling £290 million have been imposed, but these are tax-deductible and equivalent to 13 days of Barclays profits. What most people have long found difficult to understand is why banks and other favoured sectors are subject to regulatory discipline rather than to the full rigour of the criminal law. That will be even more incomprehensible if it happens in this instance.

If a bank clerk tried to clear his gambling debts by stealing a few thousand and was (inevitably) caught, the certainty is that he would end up in the dock at the behest of his employers, who would solemnly declare that they operated a policy of prosecution in all cases for the purpose of protecting their customers and shareholders from such felonies. But multiply the sums involved in “attempted manipulation and false reporting” by hundreds of millions and an entirely different set of standards prevails.

This is because bankers for so long operated under the protection of the emperor’s new clothes. They made so much money that it was assumed they must be smart. And as long as their smartness could be equated to some kind of wider interest, then few people were bothered that they made so much money. It was vulgar, it was greedy, but it seemed to work. Expose their nakedness and a very different reality emerges.

Every British household is carrying a financial burden of £43,000 for the bail-out which the UK government was forced into in 2008. But the grim message of recent events is that the greed continues unabated and the only moral precept which applies to many leading figures in the sector is whether or not they can get away with it. They in turn drive the culture below them. Yet in every instance there were losers who, in the last analysis, tend to be ordinary savers and businesses, working honestly to make their daily bread.

Hot on the heels of the Barclays ruling, the FSA has ordered RBS, Barclays, HSBC and Lloyds to pay “redress” to 28,000 small and medium businesses for mis-selling complex financial products – the individuals at the sharp end of marketing these products having been driven by “rewards and incentives”. How do the architects of these schemes, who know perfectly well what they are doing, sleep at night?

If ever there was an industry which cried out for a full-scale inquiry into its operations, malpractices and the impact of these upon society, it is British banking. In Harold Wilson’s day, the answer to each major crisis was to set up a royal commission. At the time, this approach was often ridiculed as a device for kicking inconvenient matters into the long grass, but how welcome the occasional use of it would be today.

The problem with British banking culture is not just that it is so driven by greed and excess. It is that, as a result of that distortion, it is diverted from what should be its central economic purpose – which is to contribute to the long-term health of the country’s economy. The German banks continue to understand that responsibility in a way that the British ones have long since neglected, which explains a lot about relative economic performance.

While a royal commission would be the top option for an examination of our banking system, the one opted for by David Cameron is at the bottom of the pile. Handing a task of this depth and extent to a House of Commons committee guarantees that nothing much will emerge and even less will change. MPs are not equipped to ask the questions or probe the complexities of the Libor scandal, far less the wider issues that it symptomises.

The standard practice on these committees is for the officials to hand MPs a few questions in advance, which they can then look good by asking. Occasionally, individual MPs do their own research and try to be more forensic, as with Tom Watson and Rupert Murdoch. But the results of these time-limited evidence sessions are invariably unsatisfactory and the reports rarely command more than a day’s headlines. Presumably, that is the objective.

At least Westminster is going to have some kind of inquiry into banking malpractice. We are still waiting for one of any kind at Holyrood. When the Scottish Parliament was set up, one of its supposed merits was the strength of its committee system. I can’t say I have seen much sign of it, and the failure by MSPs of all parties since 2008 to mount a full-scale investigation into the biggest Scottish financial disaster since the Darien Scheme remains astonishing.

The excuse that the FSA was investigating both the RBS and HBOS collapses will expire once the latter report is produced. But it only ever was an excuse. It was well within the powers of Holyrood to investigate the impact of the banks’ behaviour over the past decade on the Scottish economy and thereby open the door to a much fuller understanding of what went on in their Edinburgh boardrooms and on the floors below. The truth is that there are too many vested interests in these questions not being asked or answered.

I fear the same is true at Westminster, though Ed Miliband is calling for an “open, judge-led public inquiry” and I hope he means it. There would not be many heroes of any political persuasion in the story that emerged, and the folly of “light-touch regulation” which Labour misguidedly embraced would be exposed for what it was: a piece of special pleading by unscrupulous operators who were driven by a belief in their own right to untouchability.

But at both Holyrood and Westminster, there is a continuing obligation not only to seek explanations of what went wrong but also to give the victims a platform to say their piece. The fact that banking scandals continue on the scale exposed over the past week confirms that this is not a story which is in the past, but one which is still very much alive and smelling.