Wow! “We need to have a low tolerance for firms that consistently bump along the bottom”. With a warning like that from the new head of enforcement and financial crime at the FSA, Tracey McDermott, the Big Five banks must be……………….laughing all the way to the bank. We’ve heard all this sort of thing before: mistakes were made, we express our regrets, but we’ve learnt our lesson, and these things will never happen again………..until the next time. So what’s really changed? Why, 5 years after the crash began in 2007, have no top bankers been sent to jail? Why did the authorities get not an inkling that the explosion of toxic derivatives (probably some £2-3 trillions worth) might bring down the whole system? Why did they take no action for 7 years when LIBOR was being regularly manipulated by 14 major banks under their very noses in London? Why is it that, when there is another colossal scandal, it is nearly always triggered by the US courts, not by the British regulators?
The latest allegations, that Standard Chartered, Britain’s fifth biggest bank, laundered $250bn (£160bn) of funds for Iranian clients in breach of sanctions, once again come from a US regulator. Of course it is true that the bank denies the allegations outright, saying that the number of transactions hiding the Iranian funds by falsifying the records was ‘only’ 300, not the 60,000 alleged in the US, and we shall have to wait to see who is right. But the key fact remains that it was a US lawyer, not the British FSA, which booked Standard Chartered for a criminal offence, not the UK authorities. Why?
Why Why did the British regulators not uncover years ago that HSBC was laundering huge sums for drug cartels, criminal gangs and pariah states? Why was the PPI mis-selling scandal allowed over several years to get such a grip on millions that the compensation bill for the big banks now exceeds £8bn? Why did the elaborate Barcap contrivances which allowed Barclays to make billions of profits by deviously sidestepping the taxman not investigated? Why was Eric Daniels, then chief executive at Lloyds, allowed to get away with the takeover of HBOS after undertaking, on his own admission, only 5% of the due diligence? Why were RBS and other banks allowed to get away with lending at an exceedingly dangerous capital ratio of up to 33:1? The facade of regulation-lite still lingers in the City of London, and the culture of gaming the regulators shows no sign of stopping.