They’re being forced to yield inch by inch. First, Barclays’ chairman Agius said he had no intention of resigning; 24 hours later he’d gone. Then the shameless and disgraced chief executive Diamond announced that he was the best person to oversee a change in culture at the bank, having told us a few months ago that Barclays laid great store by being a ‘good citizen’ whilst, as we now know, presiding over the excesses of Barcap, the LIBOR rate-fixing scandal and the latest mis-selling scam. Another 24 hours, he was forced to talk the plank. Then the government, desperate to avoid a Leveson-style investigation of the successive scandals of the banks from whom the Tories get half their income (with all the under-cover deals that go with that), proposed an MP inquiry into the banks! One has to ask, are they serious? The mud-slinging, party-baiting gladiatorial exhibition in the Commons yesterday should put paid to that. So what should be done?
The only argument the government came up with yesterday to justify their idea of an MPs tribunal was that it would be quick. It would report by the end of the year, quickly enough to write amendments into the promised Bank bill next spring which is primarily aimed at implementing the (watered down) Vickers recommendations. The decisive argument against this is that it would on that timescale be a relatively shallow inquiry concentrating heavily on the malfeasance around LIBOR and not embracing the far wider and more significant issues around not just the underlying culture but also the fundamental structure and role of the banking industry, all of which are heavily flawed. To make an obvious point, there still has been no systematic inquiry into how and why the banks brought about the biggest financial crash for a century and nearly derailed the entire global economy.
Whilst sticking with what is really needed, a thorough judge-led inquiry, it is still possible however to reconcile that with the need for speedy reform. The LIBOR scandal was allowed to happen because the process was superintended by the British Banking Association (BBA), rather like inviting the food and drinks industry to take responsibility for combatting obesity. There’s nothing to stop the government, this autumn if not before, shifting oversight of the interest rate market from the incestuous grip of the BBA to the FSA or Bank of England, with power to bring criminal charges on evidence of maerket abuse. That would then leave the far bigger issues of breaking up the Big Five banks and regaining public control of the money supply to a proper longer-term inquiry.