Today it is reported that the Financial Conduct Authority (FCA) has imposed a fine of £14m on RBS for deficient mortgage record-keeping and poor advice to borrowers. It has still not imposed any penalty on RBS for its far more serious offence regarding the sale of US mortgage-backed securities. By contrast, only last week the US regulator fined Bank of America $16.7 (£10.2bn) for misleading investors in its mortgage-backed securities – nearly 1,000 times more than the penalty just announced for the British bank. This colossal difference in the impact of regulation between the US and UK goes a long way to explain why the UK banks are still continuing to get away with impunity after nearly crashing the entire British economy. ‘Light touch’ regulation (a euphemism for its almost total absence) still rules. But it’s even worse than that, with the UK banks now sticking up two fingers at the regulators at every opportunity.
The banks have not a shred of remorse for the havoc that they caused. Bob Diamond, characteristically, three years ago was already whining that ‘enough was enough’. Now this year all the Big 4 – HSBC, Barclays, Lloyds and RBS – awarded senior executives fixed pay allowances to get round the EU cap on bonuses at 200% of salary. Two fingers to regulators seeking to curb obscene bonuses. Then the British Bankers Association attacked the Bank of England’s plans to extend the claw-back of bonuses to 7 years. Two fingers to regulators trying to reverse bonuses later found to be wholly unjustified. Then last month the HSBC chairman Douglas Flint complained there was ‘growing fatigue’ caused by the demands of regulation and that banks were becoming ‘risk-averse’ for fear of mistakes. This from a bank that laundered billions on behalf of Mexican drug cartels and pariah states like Iran.
Then it was announced this month that Lloyds and Santander were pushing to delay the ring-fencing of retail from investment banking, even though it had already been postponed so as not to come into effect till 2019, far too late to avoid the very real risk of another ‘casino’ banking crash requiring a repeat of the massive taxpayer bailout of 2008. It was also recently announced that 11 major banks still did not have satisfactory ‘living wills’ contingency plans in place to prevent a collapse threatening the financial system as a whole. So much for banks complying with regulators’ demands to avoid another financial/economic catastrophe. And we even learnt a few weeks ago that staff at Lloyds were still being pressurised to sell credit cards, loans and investments to customers by linking sales performance to bonuses. This from a bank fined £28m by the FCA last December for its aggressive sales culture.
Can anyone trust private banks to behave responsibly and lawfully? Not on the evidence so far. Either regulation has got to get a whole lot tougher or the private banks must be brought back into public ownership.