Leaders: Britain’s banking probity is beyond valuation

MPs on the House of Commons Treasury Select Committee, who investigated his role in the manipulation of the Libor interest rate, found that his evidence in the role that Barclays staff played in the rate-fixing scandal was “highly selective”.

In other words, they believe that he did not give a full and frank account, leaving out evidence which might have, presumably, put both him and the bank in a worse light than they were already in. And, if one of the committee’s recommendations is implemented, any banker who attempts to repeat what Mr Diamond, or his staff, did at some point in the future, they would face criminal prosecution.

That recommendation should indeed become law. Libor is not some arcane financial tool but a crucial indicator which sets the interest rate at which all banks and many financial institutions borrow and lend money to each other. It is set on data provided by a number of banks. If any of them provide false data, as Barclays did, then someone, somewhere is going to be paying a false interest rate and liable to lose money. That is either theft or fraud, and bankers should be liable to be prosecuted for that like any other thief or fraudster.

Part of Mr Diamond’s defence was a note of a telephone conversation with Paul Tucker, deputy governor of the Bank of England, in which Mr Tucker appeared to give a nod or a wink to the Libor-fixing practices. Mr Tucker did no such thing, the MPs believe, but they do consider that both the Bank and the Financial Services Authority should have been more alert and able to spot the manipulation.

This seems rather a mild wrist-slapping. Given that concern about the probity of the Libor rates being set in London was raised in both the Wall Street Journal, and by the New York Federal Reserve Bank, it remains surprising that Britain’s financial authorities did not act sooner than they did. The stronger governance framework at the Bank recommended by MPs may go some way to assure that Britain’s regulators will be more proactive, but it is not a complete solution.

As the committee’s chairman, Andrew Tyrie MP, observed, the fact that major British banks (others are certain to join Barclays in the dock for this scandal) were rigging the market at a time of great market stress, has done huge damage to Britain’s reputation for financial probity.

Restoring that will require big changes in the institutional and regulatory landscape. The risk is that banks will resist these, complaining that they impose costs which render them uncompetitive in the international market. Probity and trust are, however, values which are priceless in financial services.

Bankers need to understand that in order to increase their stock of these values, they will have to pay a price in terms of more regulation.

Best intention, worst outcome

After two years in which deaths from the abuse of illegal drugs fell, giving some hope that a corner had been turned in tackling this scourge, the death toll shot up again in 2011. Longer-term Scottish Government statistics show that the trend has risen remorselessly for the last decade and a half, reaching an appalling 584 fatalities last year, or more than 10 people dying every week from drug abuse.

And the part state-supplied methadone plays in the current drug culture is of growing

concern.

By making the heroin substitute available to addicts on prescription, the theory is that they get the same high as they do from heroin but do not need to buy illegal drugs. They are therefore given an opportunity to get their lives, at least financially, back on track and then have the chance to reduce and eventually conquer their addiction.

Some, though not all, people who work with addicts are heavily sceptical. These new figures appear to bolster the critics. More than half of the deaths – 275 – are methadone-related.

It appears most of this was due to black market, rather than prescribed, methadone which some addicts apparently used in order to give themselves a booster to supplement low-purity heroin circulating in 2011. But the reality is that methadone has become just another commodity on the street traded by dealers, and it is safe to assume the NHS is the source of the vast majority, if not all, of that methadone. At the very least there is now a case for examining whether the methadone programme is really working. Is it really a help, or is it actually a state-issued drug making the problem worse?