BEWARE! THE BANKS ARE OUT TO GET YOU!

[Stanley]

Michael, who mentioned LIBOR in the 1980s? It wasn't even set up then. LIBOR has nothing to do with the Bank of England or the FSA. That's the whole point about it. It's an independent assessment of average inter bank lending rates based on reports from individual banks as to what their current rate is, updated daily or even more frequently if the market is moving fast. As such it is valuable because it gives all other financial institutions a real-time measure of the price of credit and is used world wide in setting interest rates for other lending. This is how it affects trillions of £s of credit every day right down to mortgage rates and small loans.It was fast because it wasn't checked, it relied solely on trust. This is why Barclays shares yesterday at one point lost almost 19% of their value, loss of trust. As for any general compensation, forget it, the scale is too big and other banks are under investigation, the main ones at the moment are City Bank and UBS, we haven't seen the true scale of this yet.
The thing that I find amazing and in this case the blame can be squarely placed on the regulators and legislators is the fact that in the US there is legislation that allows specific charges to be laid for this fraud. Here in the UK they are telling us that we have no specific charge to cover it. Quite amazing.....
I think this may be traced back to the days when business in the City was done by handshake between 'gentlemen'. Those days have long gone along with the ethical and moral structure that supported it and so the first thing to do is to revise the law regarding these matters. Forget the myth of probity in the City.
The bottom line in this matter is that regulation could never deal with a mechanism that is based on trust and operating in real-time, the regulators can only react to what has happened and then only on hard evidence that the rate was being fraudulently adjusted. It is a moral and ethical failure within the banks and in the final analysis the ethics of the organisation are the responsibility of the top management. The buck stops with them, that's why they are paid so much.
I see Paddy Pants Down reads history (or OG!) he alluded to the Nye Bevan quote on Eden yesterday when he called for Bob Diamond to 'step down'. Bob Diamond has said he has no intention of resigning. This shows up another weakness of the banks. There should be an extraordinary meeting of the shareholders and he should be sacked. Problem is of course that so much of the equity is held by financial institutions who are members of the club. Why haven't we heard a howl of outrage from them?

[Stanley]

Have a look at this LINK. I haven't quite got my head around it yet but coming on top of the LIBOR scandal this is yet another example of traders seeking more profit by extending the reach of casino bank 'instruments', in this case complicated 'interest rate swaps', to small businesses and traders who don't understand them and are often caught out by the consequences. Nobody has computed the compensation yet but it is expected to be significant.

[Tardis]

I'm sorry, but:

you're arguement has as much credibility as a repeat burglar standing in a street of open houses full of loot, and thinking that he won't rob them. Stand a policeman in the street and he thinks twice, but given the opportunity...

Regulation is there to be pro-active, without them what is the levy paying for? Huge FSA salaries?

Even the deputy Labour Whip is now saying "we made mistakes in legislation"

The problem is you can shout and scream as much as you want, but if you want to change things buy a share in the company and go to the meetings. Because Brown's banking regulations meant that their triumvirate were looking the other way and the bankers knew that the Law couldn't touch them.

As an adjunct I will give this example:

The Town Council has been over paid by almost £5000 in re-imbursement from the LEAF study, and ethics would prevail that they fess up to this and hand the money back. "Strangely" at the meeting on Wednesday night no one said a word.

[Bruff]

That presupposes that the threat of detection deters the criminal. Or if you like, the threat of detection deters me from criminality - that is, seeing a lap top in an open car, I would nick if it wasn't for the fact that I feared being caught. Not the case for me - my not taking the opportunity to nick the laptop has nothing whatsover to do with the possibility of being caught by an enforcing authority, proactive or otherwise. Basically, I'm just not that way inclined. Clearly, an enforcement officer on every 'street' would deter those who are that way inclined, but given that this is not a realistic proposition, one has to do the best one can.

I don't think any sensible person would suggest that there have been no failings in regulatory oversight, nor indeed failing by politicians in the design of the size, shape and scope of this regulatory framework. I've certainly not suggested this. But I'm not convinced the fault for whatever has gone on the banks is wholly down to these two failings. There do seem to be some very strange characters indeed working in finance, if I'm to be charitable.

The Council overpayment is interesting. Is the suggestion they did the right thing, whatever the ethics of the matter? In the same way that, if I found £50 on the train, I should think it's my lucky day and not hand it in?

Richard Broughton

[Tardis]

If you found £50 on a train in Scotland and didn't hand it in then technically you would be in breech of the Law. Whether or not you will depends upon whether you think you will be caught (opportunity) and what would be the consequences (deterent). The latter has to be sufficient. Remember that Barclays have been fined £50 million on a price fixing that may involve trillions. 4 years to investigate (when brought to the attention of the authorities). Even I'd take that risk because the likelyhood is that you aren't going to be caught.

I find it interesting that the Fraud Act does not apply within bankers contracts, maybe because it is not legally binding

As to work ethic:

Price of goods/services = [Actual cost (a) + Profit for reinvestment (b) + haggling room (c)] + 25/100(a+b+c) for VAT

Thus is it any surprise that people inflate what they want?

Buy a share or don't use banks, sounds like RBS, LLoyds and HSBC did exactly the same thing along with over 30 more. So custom and practice. LIBOR only advisory.

[Bruff]

Phew. That's OK then. Nothing to see here. Move along.

Rather more seriously, this may not be criminal but the fine certainly sends the message it is questionable and against accepted standards. You might say this is a judgement on moral and ethical standards. If as a society we tolerate this at the top, or explain it away, we should not expect anything better from others 'lower down'. We cannot be purely rational and cold-headed about all this; there are and will be societal consequences. And these may be severe.

Richard Broughton

[Tripps]

"you would be in breech of the Law"

Only if you trousered it. That's a bit subtle for me, but I couldn't resist.

[Stanley]

"LIBOR only advisory." Nobody said it wasn't but the whole point is that if you took out a loan at an interest rate of LIBOR+2% it ceased to be 'advisory' and became a direct effect of the fraud on the borrower. This is how it affected trillions of transactions and why it is regarded so seriously. Trust is essential to the relationship between a bank and its client, Barclays and the other un-named banks treated this principle with contempt. Regulation failed because nobody has yet found a way to regulate morals and ethics. You can punish breaches of a code if it exists but even so how would you know it was going on if the internal systems of the bank hid it? In this case I suspect it was weight of evidence from whistle-blowers.
Some of us have been banging on for years about the deterioration in the service offered by banks to their customers and I have to admit that at times I wondered if we were perhaps a touch too shrill, perhaps what we were railing against was simply progress. It is obvious now that this was not the case, our suspicions had good foundations. All-pervasive greed has forced out the core ethics of honesty and service to customers. The Lords of the Universe acted as though they were not only above ethics but the law as well. Anyone care to put a figure on what this has cost the UK economy? The full impact of the interest swap alone is just emerging and the BofE has stated quite clearly that this must be addressed by stopping the most egregious schemes and paying compensation. Add in PPI and the derivatives market that brought the banks to their knees in 2008. This is an incredible situation, a system that has proved to be completely out of control and unfit for purpose and yet the bankers are fighting every move to curb the worst of their excesses. The question has to be asked, why? Could it be that the banks control the regulators and the politicians? The failure is not only in ethics and regulation, it is a failure of national governance.

[Tardis]

Merv the swerve saying he won't hold an investigation into what went wrong as "we know". Yes, but it's not written down on paper in the public sphere yet.

Weird Ed and Blinky Balls then call for the enquiry, even though Weird Ed was Chief bag carrier at the treasury to Brown and Balls was the main man for the policy

Plus who would want an enquiry where the main star witness would be the shambling Brown?

Meantime the 10% tax of total tax revenue provided by the bankers is diminishing, ensuring that everyone else has to pay more in direct taxes

[Stanley]

So it's all 'down to the last government'? Every government since the late 60s has 'lightened' regulation for their own ends.
'Regulation' couldn't have picked this up. It was a daily mechanism which nobody would have questioned because the banks were regarded as basically honest in their reporting. Regulation can't alter culture. That's why this is part of a far larger problem that has been increasingly evident for many years, the erosion of ethics and standards of service in the system. The only thing I know about that is that it starts from the top with the example set by the CEOs. Their example has been that acquisitiveness and greed are good, the message from that is 'go to it lads'. Same principle applies to politicians.
It struck me yesterday while listening to discussion on the radio that there is very little difference between these young men rigging the system and the young looters we saw raiding shops in the riots.They were after something for nothing because 'they deserved it' and were in a position to get it.

[Whyperion]

I thought LIBOR did exist by the Mid 1980s, I had a substantial number of leases which had triggers for either movement (floor/ceiling) or initial fix based on the LIBOR rate ( the rate itself could be the daily , 3 Month , 6 Month or One Year ) ?

LIBOR often used in commercial contracts as well , in the construction industry for dealing with any late contractual payments and so on , some contracts though refer to BoE base rate or specify an individual bank's base lending rate.

Cannot understand why fraud act does not apply , isnt there a clause for ' obtaining a pecuniary advantage by deception ? Civil law could mean a 'losing' bank or similar could sue Barclays or whomever for the loss incurred based on a false statement made affecting the rate.

[Tripps]

I heard on the radio recently that the LIBOR is fixed daily,and that 16 banks send in their figures. The highest, and lowest four are eliminated, and an average is taken of the middle eight. I don't see how the figures of one organisation eg Barclays, can have much effect. There may be much more to emerge yet. Thankfully the Americans are jointly on the case, and they act much more directly. For comparison Madoff has been in jail some time now, whilst Asil Nadir has only just reached trial (voluntarily) after about thirty years.

PS. only half an hour later. I knew there was more to come, but I didn't expect this!
Robert Peston has another scoop. "Barclays was acting on the instructions of the Bank of England when they falsified the LIbor figures". Nothing in writing you understand, and different recollections of the conversation.

[Stanley]

Rumour, denials, resignations.... what a way to run a banking system! (LINK) Only firm news is that the chairman Marcus Agius has resigned and Diamond Bob stays. Question it raises in my mind is whether the directors of the bank think that a symbolic resignation and retention of the man who many see as culpable is best because they see Diamond as a money-maker for the bank. Shouldn't the shareholders be enraged? As far as I am concerned, arguments about LIBOR are a distraction. The root of the problem is the erosion of ethical behaviour and the consequent loss of trust in the bank and the City of London as a whole. These 'experts' managed the biggest bank crash in history and are now demolishing any credibility they had left. What do they do for an encore?

[Tardis]

"There is no requirement to regulate LIBOR"

"We must watch LIBOR to ensure that our banks are fully capitalised and able to fully function"

Same person, one before, one after the crash.

[Tizer]

You haven't seen anything in here from Tizer for a while - the bank trouble was all too much and I had to go and lie down. More seriously, I've been on holiday for a week in Cornwall, but it looks like I chose a good time to go away! Thanks for keeping up the debate on banks in this thread. I've read through the 3 or more pages of posts from the last week and I'll add one point now - when discussing morality and ethics we should remember that these same banks have, for many years, been mis-selling payment protection insurance, mis-treating elderly and disabled customers, and generally ripping off customers with extortionate credit card interest rates and massive overdraft penalties. The problems have trickled down way beyond the levels of Diamond Bob and his mates and it's all become part of banking business culture. My previous neighbour who had been a Lloyds bank manager in earlier days would have died of shame if this had been found going on in his time. And I'll echo one of Stanley's comments from an earlier post - I feel deep sympathy for all those poor employees who are not among these `bankers' but daily man the counters in the branches up and down the UK and who must be feeling thoroughly disheartened to know how their efforts to treat their customers well are overwhelmed by the greedy people at higher levels in their banks.

On a happier note, I hope many of you heard the excellent `Diamond Bob' piece on the Radio 4 `BH' programme on Sunday morning. A used car dealer called Diamond Bob promising to get you a good deal, `know what I mean, guv?' I loved the reference to `spreading the risk over a number of vehicles' which was a lovely caricature of bankers' use of the word `vehicle'. And the crooked bloke saying `Let's face it mate, there'll always be a few bad apples, know what I mean?' [If you can get a podcast or hear it on the `Listen Again' service the piece was about 30 minutes in from the start of the programme. Marvellous stuff!]

[Whyperion]

I thought Mr Diamond's apology was better irony

[Tardis]

I chuckled at weird Ed stating that some bankers should go to prison, when he knows exactly who wrote that legislation, and also notes that through omission there isn't a great deal of Law that actually covers the behaviour. Apparently the judiciary are looking elsewhere to see if any other piece of Law covers it

[Stanley]

"On a happier note, I hope many of you heard the excellent `Diamond Bob' piece on the Radio 4 `BH' programme on Sunday morning. A used car dealer called Diamond Bob promising to get you a good deal, `know what I mean, guv?' I loved the reference to `spreading the risk over a number of vehicles' which was a lovely caricature of bankers' use of the word `vehicle'. And the crooked bloke saying `Let's face it mate, there'll always be a few bad apples, know what I mean?' [If you can get a podcast or hear it on the `Listen Again' service the piece was about 30 minutes in from the start of the programme. Marvellous stuff!]"
Glad you and Mrs T had a nice break. And yes, I heard it and thought it was brilliant! I tried to call my old bank manager and ask his views but he has flit and I have lost him. I have little doubt he would be as incensed as we are.
What's annoying me at the moment is the selective sniping in Parliament and elsewhere trying to make the matter of bad regulation a political matter. Time everyone realised that this is not the time for narrow personal feuds or political infighting, what we need is agreement that this is a problem which has been growing for more than twenty years and it would be more productive to address possible solutions. I heard an experienced stockbroker and banker speaking on R4 yesterday and his opinion was that fear balances out greed and a good start would be to apply some meaningful sanctions against offenders like gaol sentences. I'll vote for that! I'm very suspicious as to Cameron seeming to want to keep any enquiry in house instead of having a judicial enquiry a la Leveson. Funny that Angela Knight hasn't been on the air reassuring us that all is well in the Banks....
Similar opinions last night in the Panorama programme on call centres ignoring the numbers registered as preferring not to get cold calls. The system doesn't work with foreign calls and some domestic call centres are disregarding it because they know that out of about 1500 complaints a month only one call centre has ever been prosecuted. Another area where a dose of fear might do some good.

[Stanley]

Breaking news that Diamond Bob has resigned as Barclays CEO with immediate effect. Chairman to stay on and head the search for another CEO. Bob will still testify to Parliament no doubt to proffer the 'not me guv' defence.

[Tizer]

"..what we need is agreement that this is a problem which has been growing for more than twenty years.." - Stanley
Spot on. I had a letter published in The Times, I think it was mid-90s, written in response to some financial fraud or other in the City. I got people contacting me with information on other dodgy goings-on in the `financial institutions'. I had to to fend them off and explain that I wasn't a journalist and didn't have any influence, and suggest the contact The Times journalists. They were people who worked in the City and had seen it all happening but left in disgust.

Do you remember the arguments that a successful financial centre in the City of London had a `trickle down' effect that we would all benefit from? Well, the trickle down certainly works, but in a different way. The amoral, unethical, `anything goes', `try it on' attitude has trickled down so that it now permeates society and business.

[Bruff]

I shall only note that for every New Labour Minister who 'wrote' the seemingly light-touch regulations we have, there was their Opposition shadow haranging them to make the touch even lighter. I really do fail to see what purpose it serves to be partial on this question. All sensible people know that both main parties have been in thrall to the finance sector for the best part of three decades. The notion that things would have been any different had we an alternative administration at any time during the period 1997 - 2010 is fanciful in the extreme. One has to admire the chutzpah of the current Chancellor in seeming to suggest, albeit obliquely, that it would have been - someone should have waved the Redwood/Wolfson report from 2007 at him (this is still available on the Conservative's website, a fascinating read during these times).

The best way to ensure that nothing much will change and business will continue as usual, is to push the line that if only 'we' were in charge and not 'them' we wouldn't have come to this sorry pass. I frankly don't care which politicians any inquiry might nobble; the issue is rather bigger than that.

Richard Broughton

[EileenDavid]

RBS was saying that they think the pound will grow more against the Euro. Hope so but should we believe them after their track record. Eileen

[Stanley]

Richard, from your mouth to God's Ear! As you know I have been arguing for a while that the situation we are in at the moment is as dangerous as 1940 and the solution then was to ditch Party Politics and form a War Coalition which, in case we have forgotten, worked well and got us through to victory. I also suspect that, like the banks, the size of the task of governance is too big to manage. One thing we are learning from the Leveson enquiry is that a truly independent forum with adequate powers can dig down and uncover the truth of a particular circumstance. My fear at the moment is that Cameron's Parliamentary version of an enquiry will be too close to the hidden 'back-channels' of influence that the financial sector has constructed inside government. Look at the 87 SPADS, many with links to the financial sector. Turkeys don't vote for Xmas! The elephant in the room is the fact that many politicians have had no experience of governing by principle but only understand influence and self-preservation.
The present ferment concentrating on Diamond Bob is a case in point. He is acting as a lightning rod for the whole of the banking sector. Noticeable that the BBA and Angela are keeping stum, it will suit them down to the ground if all the blame for LIBOR falls on him because this diverts attention from the wider problems of ethical climate, nepotism and the incestuous relationship between governance and the financial sector. The question isn't blame but consequence and the possible remedies. In my opinion it is to reduce the linkages between politicians and the great levers of power in our society. We need powerful independent bodies, quite possibly run by the judiciary because they seem to be the only untainted vessels of power we have at the moment, running systems like finance, health, education etc. These would reduce the load on governance by Parliament and allow them to set their own house in order. Problem is of course that this is revolutionary and requires Constitutional change, it may be that there is too much inertia in the system to allow this change to happen. If that is the case it will require a catastrophic failure of the present systems to trigger necessary change. It could get that serious....

[Tardis]

So the high noon of Diamond's appearance at a parliamentary committee happens today

pointing the finger at the BoE who were being pressurised by one of the finance team coming out of Drowning street. Surmise that it is Dame Scritti, Brown's promoted henchwoman in the treasury

Blinky Balls saying he was Children's minister dealing with Baby P and was not in the discussions (Darling says otherwise)

Those of you wishing for more regulation, just ask why the current regulations aren't working. There is enough there to do something about it, but maybe the regulators were told to look the other way.

Then how it will work.

Figures out show that UK banks are now making 50% less profit on exactly the same amount of asset base, and have fallen out of the top 10 in the world, and of course Brown built the country's tax structure on that profit, so with Treasury receipts down everyone else will have to be taxed much more to make up the shortfall because even with the reduced profits the banks provide 12% of Treasury receipts

[Tardis]

Pendle Council use Lloyds, and have done for 5 years