Today, 12 December, Royal Bank of Scotland hit the headlines for deliberately disguising and pushing payments through to countries against which the US has political sanctions. The corporate deception landed it with a £62m fine.
Yesterday, it was Lloyd’s turn to face a £28m fine for what the FCA called “serious failings” over the way it was incentivising its staff - big bonuses, threats of sacking - employees caught between the devil of greed and the deep blue sea of unemployment.
I cannot pick up a paper without seeing huge fines being levelled at banks. Libor, PPI, incentives, mis-selling of investment bonds, interest rate swaps, injurious rate rises on (supposedly) lifetime tracker mortgages. Day in, day out, the banks are shedding millions of pounds both sides of the Atlantic for their shoddy practices.
And what happens to the senior executives? What happens to those who set the policy and enforce it at these institutions? Where are they?
Hop over to the US with me for the moment. On the same day that RBS was whacked with a fine, the US Department of Justice was busy sending down individuals for their roles in the mortgage securitisation crisis. I quote from a statement issued on Thursday 12 December: “Earl Gross, 74, of Las Vegas, the former president and chief executive officer of US Mortgage, a loan servicing company, was sentenced to serve 18 months in prison for his role in an $8m scheme to defraud Wells Fargo Bank”.
President AND chief executive. Sent down at 74. Not too old, nor too senior. He’s not the first to be judged and found wanting in the US, and he won’t be the last.
Back in the UK, I challenge you to name one chief executive and president of a bank who has been tried for his or her role in financial crisis anti-management or fraud. Some were encouraged to step down. Others bowed to public pressure to give up their knighthoods - awarded for ‘services to financial services’, no less. But have any been imprisoned as an example?
No. Furthermore, by now many are busy stacking their 12ft Norwegian Pines into their entrance hall(s) and getting the domestic help to decorate it, as they sip aged wine from their cool cellars and light their cigars with £50 notes, newly minted.
That’s possibly an exaggeration. Although... is it? The Funding for Lending scheme has poured millions into the coffers of these banks, whose execs have gone cap in one hand to the taxpayer via the government, all the while signing bonus scheme agreements behind their back with the other. Sure, FLS was aimed at lending to small businesses and, earlier on this year, to help fund mortgages. How much of this trickled through the system to the end consumer, the taxpayer?
You’ve seen clients left chasing the house they desire as it slips out of their reach thanks to the banks’ seeming reluctance to lend. You’ve had countless conversations with your clients about the paucity of their cash returns and the fact that banks just don’t care that a savings account can be paying 0.1 per cent interest. Under FLS, the banks don’t need depositors. Even with the fines they are shelling out - they’re still able to get the government - ie the taxpayer - to bail them out.
Then a Freedom of Information Act request comes back to us and we see that the FSA granted waivers to Co-operative Bank over capital adequacy and banking governance. Had it not applied the waiver, we are led to believe, the bank could have gone under.
But wait! Weren’t we told that there is no “too big to fail” bank? That banks should be and will be allowed to fail? But here is the regulator seemingly allowing governance and lower-than-required capital adequacy on a bank more in the news now for its alleged drug-lovin’ preacher man than for its ethical investment expertise.
I should be more angry at lackadasical regulation of our one-time crowning glory, the banking sector. This is my money, my taxes, not going to help some ex-marine from Afghanistan struggling to find a job after being demobbed. My taxes are not going to help find legal aid for genuine asylum seekers, or to help those families on the borderline of benefits make ends meet. No. My taxes are seemingly being pumped into banks via FLS and out again via fines.
Banks are still too big to fail. They are not too big to bail. The people setting the bad decisions are getting off scot-free and the corporate nature of the fines covers up the individual culpability. And while the FLS lifejacket remains and a protective old boys’ club hides its members under its steely wings, we will never see proper justice being meted out against those who deserve it most.
Happy Christmas.
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