We use cookies to improve site performance and enhance your user experience. If you'd like to disable cookies on this device, please see our cookie management page.
If you close this message or continue to use this site, you consent to our use of cookies on this devise in accordance with our cookie policy, unless you disable them.

Close
In association with

Home > Opinion > Hal Austin

Something is seriously wrong in financial services

Recent banking scandals give rise to the question of what punishment would be appropriate to ensure that they never happen again.

By Hal Austin | Published Jul 25, 2012 | Regulation | comments

Something is wrong, seriously wrong, when one of our leading financial institutions could find itself accused of laundering money for brutally savage drug dealers who have been accused of turning a reasonably moderate developing economy in to a narco-state.

Worse than that, over the last decade, these murderers, morally and literally, have been responsible for 50,000 deaths, all connected with actual or presumed drug dealing.

As if that is not bad enough, we are drifting in to a swirl of ethical debris when other leading banks are caught up in allegations of fixing the lending benchmark on which commercial lending rates are based. What is more, from all available evidence, it now appears as if the leading regulators, or senior individuals within those organisations, were aware, or highly suspicious of the wrongdoing, yet clearly failed in their duty to raise the alarm.

We, as an industry and society, are in a mess which we can either do our best to clear up or, failing which, we send a message to future generations that criminality or basic dishonesty are fine, as long as you can get away with it.

As a society we have already institutionalised corruption-lite, from pulling strings to get little Johnny work experience, and are on our way to formalising corruption-concentrate, maximising bonuses.

We live in a business climate in which individuals and firms often pay lip service to ethical behaviour but in practice fall far from the desired performance.

This can range from managers espousing theories of listening and valuing employees, to those who pretend that the legal structure of a business, mutuals against Plcs, is the be-all and end-all in its own right.

However, consumer expectations are reflected in the way they are treated in face-to-face contact and in the way promises are delivered.

The legal structure of a business does not determine its customer care, its corporate charging principles nor indeed the rudeness and lack of courtesy of staff.

Being a mutual may be a first step, in that it sends the message that members/customers come first, but it is more than that. The reality is that banks have shot themselves in the foot, just as they did after the passing of the 1986 Financial Services Act, which created the occupational specialism of IFAs. Mutuals have a wide open goal.

With the retail distribution review in reality handing over the supply of low-cost simplified financial products to the banks, it was theirs to lose – and they have messed up.

Despite a marked resistance, it is still not too late for the regulator to take in to consideration all the developments in the market since the launch of the RDR debate, including the corrupt Libor-fixing scandal, allegations of money laundering for Eastern European oligarchs and Latin American drug dealers and make some last-minute changes.

Page 1 of 3

COMMENT AND REACTION

Our Columnists

Ashley Wassall

Ashley is editor of FTAdviser and writes on all areas of retail finance. Previously supplements editor at Money Management and editor of a European private equity publication.

John Kenchington

John is editor of Investment Adviser and has written about investments for several years. He has worked at titles including City AM and was recently named in the MHP 30 To Watch list of up-and-coming media names.

Jon Cudby

Jon is editor of Money Management and has 12 years' experience covering retail personal finance. In 2005, Jon was launch editor of FTAdviser and most recently he was head of online content for Incisive Media's financial services titles.

Tony Hazell

Tony is a freelance financial journalist, having been editor of Money Mail at the Daily Mail for a number of years. He has been writing a column in Financial Adviser since 2005.

John Lappin

John is a weekly contributor to Investment Adviser with 15 years’ experience in financial journalism and 10 years writing on the IFA sector. He was formerly editor of an IFA trade magazine.

Most Popular
More on FTAdviser
FTA jobs