Eat more slowly, a dietician once told me. Greedy people eat too quickly, she said. There is an insatiability about greed \u2013 until, that is, you realise you have overeaten. Bankers, it seems, have done the same thing with money. Not all bankers, their defenders say. Just a few. But I am not so sure.<\/p>\n
The scandal of bankers rigging inter-bank lending interest rates is, apologists for capitalism insist, down to the criminal acts of a few individuals. Yes, it\u2019s big and important, because the Libor interest rate they fiddled is used to set the price of $300 trillion-worth of loans all round the world \u2013 on everything from mortgages, credit cards and overdrafts to multi-million pound business deals. But it\u2019s the fault of dishonest individuals not a structurally-flawed system.<\/p>\n
Let\u2019s examine that. Investigators from the Financial Services Authority have the names of hundreds of bankers inside Barclays, and hundreds more in other institutions, involved in at least 257 fiddles. Multiply that by 20 \u2013 the number of banks being investigated for lying about the Libor rate \u2013 and that could well be thousands of names in some of the most prestigious City institutions.<\/p>\n
\u201cIt\u2019s hard to believe that a policy that seems so systematic wasn\u2019t known to people at, or very near, the top,\u201d Barclays former chief executive Martin Taylor has said. The Chancellor, George Osborne, has spoken of \u201csystematic greed\u201d. The Labour leader Ed Miliband has spoken of \u201cthe swaggering culture\u201d in which bankers responded to requests to fix the figures by saying \u201cDone…for you big boy\u201d or \u201cDude, I owe you big time\u201d with the promise of a bottle of Bollinger.<\/p>\n
The standard reaction to yet another crisis of confidence in our banking system is to say the rules should be tightened. Libor should no longer be fixed by bankers but by an independent regulator.\u00a0 Or it should be based on actual inter-bank lending rather than estimates. Or a Leveson-style judicial enquiry should be set up into the warped ethics of British banks.<\/p>\n
There is a limit to what new rules in an old culture can achieve. The Cambridge philosopher Onora O\u2019Neill pointed that out a few years back in her Reith lectures on Trust.\u00a0 Our society is ever creating new regulations, targets, audits and performance indicators to compensate for a growing lack of trust in modern life. The irony is that such measures appear to increase, rather than assuage, our contemporary culture of suspicion.<\/p>\n
Rules to promote trust, in practice, undermine it because they play down the integrity and good conscience needed to make any system work. If you replace common sense with health and safety laws, fair workplace behaviour with employment tribunals, referees\u2019 decisions with goal-line technology, and love with pre-nuptial agreements you erode trust rather than augmenting it. What is actually needed is a change in culture.<\/p>\n
Ironically Barclay\u2019s boss Bob Diamond has acknowledged that. \u201cNothing is more important to me than having a strong culture at Barclays,\u201d he preambled last week before adding: \u201cI am sorry that some people acted in a manner not consistent with our culture and values.\u201d In a lecture last year he said culture is difficult to define, and even more difficult to mandate, but easy to spot. It is \u201chow people behave when no-one is watching\u201d. For a bank that means all employees acting \u201cwith trust and integrity\u201d to uphold the fundamnetal principle that \u201cthe interests of customers and clients are at the very heart of every decision we make\u201d.<\/p>\n
The problem for Barclays, and the other banks, is that they have not one culture but two. The retail side has what high street banks have always had \u2013 a culture of prudence. But the investment banking side has a culture of risk-taking which has slid into a culture of greed. The impossibility of these conflicting cultures coexisting in a single financial institution became clear in the email exchange between Dude and Big Boy.<\/p>\n
Dude, at the casino end of the operation, is gambling on the very rate that Big Boy is fixing for us high street customers. Repeatedly, it is now clear from the FSA investigation, the firewall between the two proved to be champagne-permeable. The Dudes repeatedly persuaded the Big Boys to lie about the rate they were charging because even a difference of one basis point (a 0.01 percentage) would make literally millions for the bank for which they both work. A paltry bottle of Bolly was not the only reward, as the bonus culture testifies.<\/p>\n
So how do you change the culture of cavalier Big Boy Bollinger arrogance among bankers for whom breaking the rules has become a game rather than an ethical violation?\u00a0 Bob Diamond\u2019s suggestion in that lecture was to teach them citizenship. Should we laugh or cry at the idea? Or hold those bankers\u2019 citizen classes inside our jails? Or send the nation\u2019s politicians, lawyers, journalists, advertisers and business leaders along to the classes too? Aristotle would have approved, with his insistence that ethics are something which have to be learned by example rather than taught. Virtue is to be found in character because doing the right thing grows out of the habits cultivated in a society which puts responsibilities before the self-absorption of rights or wants.<\/p>\n
Perhaps we must be less ambitious and simply acknowledge that the ring-fence which the Vickers commission has proposed between the banking cultures of risk and prudence can never be solid or high enough. What this latest banking scandal suggests is that the two halves of the industry can only survive in completely separate institutions. In that way the high-risk gambling of investment banking will not be funded by taxpayers who cannot afford to see our retail banking sector collapse.\u00a0<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" Eat more slowly, a dietician once told me. Greedy people eat too quickly, she said. There is an insatiability about greed \u2013 until, that is, you realise you have overeaten. Bankers, it seems, have done the same thing with money. Not all bankers, their defenders say. Just a few. But I am not so sure. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[190,40,388,37,38],"tags":[332,288,386,467,458,468],"class_list":["post-5723","post","type-post","status-publish","format-standard","hentry","category-coalition-britain","category-ethics","category-morality-ethics","category-politics","category-society","tag-banking","tag-banks","tag-barclays","tag-bob-diamond","tag-capitalism","tag-investment-banking"],"_links":{"self":[{"href":"https:\/\/paulvallely.com\/archive\/index.php?rest_route=\/wp\/v2\/posts\/5723","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/paulvallely.com\/archive\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/paulvallely.com\/archive\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/paulvallely.com\/archive\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/paulvallely.com\/archive\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5723"}],"version-history":[{"count":9,"href":"https:\/\/paulvallely.com\/archive\/index.php?rest_route=\/wp\/v2\/posts\/5723\/revisions"}],"predecessor-version":[{"id":7252,"href":"https:\/\/paulvallely.com\/archive\/index.php?rest_route=\/wp\/v2\/posts\/5723\/revisions\/7252"}],"wp:attachment":[{"href":"https:\/\/paulvallely.com\/archive\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5723"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/paulvallely.com\/archive\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5723"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/paulvallely.com\/archive\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5723"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}