Libor scandal: Forget high-risk strategy and get back to boring banking, says Vince Cable

The Lib Dem minister said it was “increasingly clear” that the management of Britain’s banks “want to choose the high-risk, high-reward” path when it was “vital” for the public they did not.

Mr Cable has backed calls for a criminal investigation into bankers involved in manipulating the Libor system.

Addressing the Association of British Insurers last night, he said the revelations struck many “as bordering on the criminal”.

He said: “We have done everything we can to get ahead of the curve and deal with macroeconomic risks. But we can’t do this alone, and it is increasingly clear that the management of many banks still don’t get it.

“They want to choose the high-risk, high-reward path – seeking high returns on shareholder equity – when it is vital for everyone else that they don’t. And now we are learning that this daredevil behaviour included taking blatant risks, once again to the detriment of the shareholder.”

Urging shareholders to demand safer behaviour from banks, he called for the industry to become “boring” again.

He said: “When investing in bank shares is only for the brave, something has gone dreadfully wrong.

“Bank shareholders have been subjected to a hair-raising roller-coaster ride of risk, from the subprime crisis straight into a major recession, then a sovereign debt storm, and now serious revelations about behaviour that strikes many observers as bordering on the criminal.

“Investing in banks needs to be boring again – otherwise, recapitalising our financial system will be impossibly expensive or dangerously risky.”