Behind the scenes Britain’s Big 4 banks have now launched a sustained campaign to get the this Tory government to go easy on regulation and review (a euphemism for wind down) the bank levy. Considering the colossal damage that the bankers’ arrogance, mismanagement and corruption inflicted on the British economy which is still on-going and may be for another decade, that takes some chutzpah. They see it as payback time for the half of Tory party funding which the banks, hedge funds and private equity dish out every year for their benefactors. A more balanced view is that the bank levy is a charge on bank balance sheets to offset the cost of the financial crisis for taxpayers. The truth is that the banking crisis more than doubled the UK national debt which is now £1.4 trillions and still rising. An objective view would be that the current bank levy is nowhere near enough to meet its stated objective.
The bank levy paid by HSBC last year was £667m and by Barclays £462m. The other big banks paid only half of that or less: Lloyds paid £254m, RBS £250m, and Standard Chartered £222m – a total of just £1.85bn, some 2.6% of the doubling of the national debt they brought about. But that still leaves aside the web of corruption that all these banks, as well as several big foreign banks, indulged in by systematically rigging the Libor and ForEx markets to increase their profits criminally at the expense of global markets which depended on the trustworthiness of these benchmarks. Even that still excludes the vast scams that these banks perpetrated over product protection insurance and interest rate swaps which again were motivated by banks’ profit maximization without any real external benefit. It’s true that the banks have been subject to large fines for this misfeasance, but at much lower rates than those imposed by the US Department of Justice for the same offences, and without a single top executive having been sent to prison.
The real issue over financial regulation is whether it is sufficient to stave off another massive financial crash. Despite the banks’ whinging, it’s perfectly clear that by a long shot it isn’t. The proposed ring-fencing between the retail and investment arms of the banks is itself a climbdown from what is obviously needed, the reintroduction of the Glass-Steagall Act which for 63 years between 1933-1996 prevented any major banking crash, and within 11 years of its repeal led directly to the 2007-9 global financial/economic crisis. The Vickers proposed ring-fence will easily be circumvented by City arbitrage, yet the banks are still whingeing about its impact on their balance sheets, totally heedless of the effect that further weakening of an already enfeebled regulation might have on the likelihood of another global catastrophe. And to cap it all, none of these regulations are due to come into effect till 2019!
We are even now being told by insiders at the Financial Conduct Authority that they have been steered by the government to take a softer approach to regulation. That tells you all you need to know about the power structure of Britain and and the blatant discrimination shown between the treatment of the banks and hedge funds on the one hand and, just to take an example, the trade unions on the other.