We need real banking reform -- not a grandstanding inquiry
DURING his appearance before the British parliamentary committee last week, Bob Diamond, Barclays' former chief executive, referred to the term "culture" 50 times.
Five years of alarm bells sounding, bankers have still not woken up to the truth: the boom years have gone. The golden era, as some would see it, has passed and the future for banks, is dependent upon finding the right model -- and, critically, the right culture -- for this new challenging age.
However, despite numerous investigations, the fawning apologies, and the promises of better regulation, the UK banking culture is yet to change.
Last week, following on from the LIBOR scandal, the latest instalment of big-bank follies was from JPMorgan Chase, which revealed that losses from the trading fiasco at its London office have risen to €6.5bn after traders understated their losses in the first quarter.
The result: yet another banking inquiry.
Here at home, following three whitewash reports into our banking crisis, we are now gearing up for our first "proper" banking inquiry. And, already, it is descending into a farce.
The Public Accounts Committee recently published its framework for the inquiry, and is seeking the power to compel witnesses to attend. It further wants cabinet confidentiality to be waived in relation to papers dealing with the bank guarantee. Meanwhile the finance committee also wants a crack at the devious bankers.
What we can look forward to is hours of spinning and shameless grandstanding by the politicians -- which is going to be especially hard to endure.
Apart from this depressing prospect, which we are sure to witness, there is the near-certainty that they will come to the wrong conclusions.
Here is what the politicians will conclude: that on the fateful night in September 2008, the reality was that the politicians -- and probably the bankers -- were not in full possession of the facts of just how bad the books really were at the banks; that banking regulation had been far too loose for far too long; the ECB was breathing down the neck of the Government, warning it not to let any bank fail; the bankers were essentially a law unto themselves; and that the culture at the banks was "broken".
This isn't to exonerate the main players from culpability for the state we're in. Banking scandals reveal a clear lack of ethics or self-restraint among the people involved.
Most bankers have long believed any money-making scam is okay, provided you can get your bonus before it is discovered.
No amount of inquiries will change the culture at our banks -- it is too entrenched.
Only a few weeks ago, the heads of the two main banks were unhappy with the results of the Credit Review Office's (CRO) small businesses survey, which suggested that banks should lend more. So what did they do? They called the head of the CRO and gave him a dressing-down. Plus ca change...
So, instead of a political grandstanding inquiry that shows the politicians slavishly playing to the galleries, any investigation also needs to look forward and understand how to reform the banking sector, so that crises like these don't reoccur, and so that banks actually work in the public interest rather than hire propagandists to pretend they do.
In the end, financial reform is not about technicalities, but is about what role banks should play in an economy -- and what kind of economy we want.