What went wrong with the UK banking industry?
Filed under: Investing
Modern soothsayers talk of 2012, not so much as the end of the world, but more the 'year of the unveiling' when various well-held beliefs are dispelled and exposed. Once the real truth comes out, the world will change forever.
Sir Mervyn King's statement that "something went very wrong with the UK banking industry" last week and that manipulating the Libor rate was "deceitful" seem to encapsulate how far opening the investment banking Pandora's box has finally gone. Criminal malpractice seems the standard practice of today's banking culture and the "shoddy" treatment of customers often celebrated with a bottle of Bollinger once the markets closed.
Resistance was then futile for Barclay's senior management and the "fundamental loss of trust", described by the Bank of England, has led to a quick session of introspection and Bob Diamond's inevitable resignation. The tantalising conclusion of his tenure may come tomorrow when, as Allister Heath editor of City AM noted, what will or could he reveal tomorrow at the Treasury Select Committee? Will he decided to name and shame fellow colleagues or point the finger at his rivals? He really has nothing to lose now.
Being a banking CEO isn't much fun anymore. Stephen Hester at RBS has already faced flak over his handling of the IT scandal and the blame placed on the Indian junior in its Hyderabad outsourcing company allegedly may be disguising a bigger cyber attack incident. If this is true, another element of trust could be lost among its customers.
Civil litigation fears over the Libor and latest SME mis-selling scandal, dragging on for years, wiped £3.7bn off Barclays shareprice last week but it will start to erode other listed entities. The onus is back on customers and shareholders to vent their spleens and exercise their muscle. This year's Shareholder Spring did take the power back to the boardroom and away from the corridors of Parliament, where it should stay. Reports over the weekend told of stories of SMEs deserting Barclays for the Co-op and leading building societies which preach that they understand where the ethical line can be drawn.
A Leveson inquiry for the banking sector is "not needed" said the BoE's Governor because the Vickers Report has already offered the solutions. He is now beseeching politicians to implement the report's findings to try and drain the poison from the well.
In only two weeks we have seen the comedian Jimmy Carr become the penitent man admitting a "terrible error of judgment". Then the Budget U-turns showed George Osborne's numbers never stacked up. Today it looks like his moral compass was correct and will the banking hierachy actually follow suit and show some humility?