Opinion  

The creed of greed – bonuses are at heart of banks’ cheating

Is our banking system inherently corrupt? It is a fair question following the mega fines handed down to six banks including Barclays and RBS for manipulating exchange rates to inflate bonuses and defraud customers.

This was happening as recently as last September while the banks were busy apologising for cheating small businesses over Libor fixing.

Over the past 25 years or so our banks have been rocked by one scandal after another. If you drill down, one thing lies at the heart of it – the bonus culture.

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Top bankers – and sadly others from the financial world – berate us with the dogma that huge salaries and big bonuses are necessary to attract the top talent.

But it would be more accurate to say that big bonuses and mega salaries merely attract the greediest; those most motivated by financial gain. So should we be surprised when they also turn out to be so easily corruptible?

The top talent in our society are not working in banks. They are performing life-saving operations, building businesses, investigating the origins of the universe or spending hours in laboratories searching for the cures to diseases.

Some work for a pittance or for charities helping the sick and impoverished in faraway countries or war zones.

Most will never earn as much as the bankers who cheat us on exchange rates.

And none will be motivated by the sniff of a bonus or the opportunity to make a financial gain by cheating their clients.

Look at the type of ‘talent’ the bonus culture has attracted, whether it be in investment banking or in high street branches.

It is the sort that cheats on interest rates, fiddles small businesses on Libor lending, mis-sells insurance, flogs inappropriate investments to elderly people or sells premium bank accounts to those who do not need them.

While having the gall to tell us to ‘stop focusing on the past, move on,’ they continued to rip off customers.

I think it is safe to say that there is not an adult in the country who has not at some stage suffered from the underhand practices of our banks and the corrupt culture that has festered within them.

A generation of bankers has been indoctrinated by a creed of greed, and they and we are still reaping the consequences.

Are our banks inherently corrupt? On the evidence it would be hard to argue against it.

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A tax on aspiration

As Baroness Altmann sits in her pension minister’s office she might like to consider that the thing investors need is confidence that the government will never again change the rules to their disadvantage.

Peter Emery of Emery (IFA) has reminded me of pension mortgages which were briefly fashionable about 25 years ago chiefly because of the potential tax benefits.

He has a client who took one expecting to use tax-free cash to pay off his mortgage at age 50. At a stroke the age was raised to 55 and he faced paying another five years’ interest.