This comes straight from the Tax Justice Network, and is far too important not to share, especially in the light of the FCA having turned a blind eye to HSBC's role in tax evasion, already noted this morning:
As the first decade of the 21st century came to a close the hangover from two decades of excess in the financial sector finally set in. Banks collapsed and threatened to take down major economies with them. It has been a long hangover, and many are still suffering from it.
As the media, regulators and policy makers finally started to pay attention to the financial sector a series of scandals began to emerge. These ranged from carelessness to criminality on the part of major banks responsible for the administration of large parts of the economy.
Central to this issue was the standards of conduct and behaviour of many of the individuals working in banks. At lower levels the Libor fixing scandal showed a cavalier disregard for the law, with traders offering small gifts for rigging multi trillion dollar financial markets. At the top, leaders presided over institutional criminality, setting up entire divisions to deal in illegal or illicit funds.
The misconduct of the financial sector was widely accepted by government and policy makers as being a powerful factor behind the financial crisis. In an attempt to show that they were grappling with the problem, the UK Government even renamed their financial regulator — the Financial Standards Authority — the ‘Financial Conduct Authority'.
The UK Parliament's Banking Commission, reporting in 2013, described the conduct of bankers as “appalling” and lamented the lack of any individual accountability for the many failings contributing to financial crisis. In particular it said:
“Remuneration has incentivised misconduct and excessive risk-taking, reinforcing a culture where poor standards were often considered normal. Many bank staff have been paid too much for doing the wrong things, with bonuses awarded and paid before the long-term consequences become apparent.”
It therefore came as some surprise that on New Year's Eve it was revealed that the Financial Conduct Authority has dropped an investigation into the very thing it was set up to regulate, conduct.
One does wonder (or rather hope) that someone at the FCA started their New Year's celebration early, got drunk, and made a rash and unauthorised announcement; that would appear to be the most rational explanation for the change in policy. Sadly it is not so, the news was apparently snuck out in an update to the organisation's business plan. No official announcement from the FCA had been made at all, perhaps they hoped no one would notice.
Why has this been done? We can only speculate, but this latest move is just one part of a worrying in shift in the UK government's attitude towards financial institutions. Currently the FCA is looking for a new director after the previous Director, Martin Wheatley, was fired (or rather, his contract was not renewed without his consent). As one senior conservative lawmaker put it, Mr Wheatley was seen as too tough on the banks.
The person tipped for the top post now should be much more agreeable. Tracey McDermott is the person who would have been ‘ultimately responsible' for cancelling the review.
Given that conduct can be influenced by incentives, one does have to be concerned by the revolving door — how ferocious will we expect to see regulators if they believe that their future personal financial security relies on the people they are regulating?
This is not just about banker bashing, as Green MEP Molly Scott Cato put it eloquently in a letter to The Independent:
“In an economy where money is created in the private sector based on debt, a banking licence represents an extraordinary power granted to a small number of corporations by the state. Strict regulation of their activities, particularly when their risks are guaranteed by the public, is therefore essential.”
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
“Many bank staff have been paid too much for doing the wrong things” but unless we develop a clear concept of what the “right things are” then calling something ‘wrong’ has no real meaning.
Have all governments treated money institutions as sacred cows. That they are so revered and protected, with power and influence over all is evidently accepted and allowed. I really don’t know much about money matters, could write it on a postcard. how to shake the top of the pyramid, change the shape to a circle, can it be done. Mr Corbyn you have an enormous task.
The regulators are toothless now by design due to the “revolving door” and the disease of “corporatism”!
I recall over the Xmas period that someone writing in The Guardian noted that the very visible attendance of Cameron, Osborne and others at Murdoch’s Xmas bash showed how confident the government are at the moment that they can do pretty much anything they like without fear of an effective challenge or any form of censure. In short, they are making full use of their position as the leaders of a parliamentary dictatorship. What’s happened at the FCA is just another example that absolute power corrupts absolutely – or in this case, where it was already absolutely corrupted, turns into naked abuse of systems, processes, and practice, of culture and thought, and ultimately, of humankind. This is accompanied by disinterest and dismissal at best, or utter contempt in general, for anyone or anything that seeks to question this approach. It represents the creation of a sphere of public life devoid of any morality or ethical considerations, other than the cheap and hollow retort from the likes of Cameron and Morgan that the UK is a “christian” country. Unfortunately we can expect more of this for as long as the EU disaster that will engulf the Tory party can be kept under lock and key.
Beyond that, a Happy New Year Richard.
Ivan
I can see you arrived in 2016 in good humour
Greetings!
Richard
I was suffering from withdrawal symptoms from not having had much chance to keep up with your blog into the New Year, Richard 🙂
But seriously, I read about the issue you report here in the issue of Private Eye that appeared just before Xmas so I knew what had – or was going to – go on. The government’s abandonment of any oversight of the export of weapons is another example, which is in itself related to their unwillingness to say anything of substance on the Saudi beheadings or of the disappearance of a group of journalists/publishers in Hong Kong (one of whom may have a British passport) – presumably “rendered” – to use that marvelous euphemism – to mainland China by “state operatives” because of their embarrassing (for the Chinese government) investigative activities/exposes.
One thing I will say in conclusion though, is that this must be the first government in my adult lifetime where however appalling I think they’ve become in terms of their actions and policies they then do stuff that’s even more appalling. As I noted previously, they are driven on, of course, in the knowledge that sooner rather than later the Tory party will implode over the EU and government will effectively be paused from that point on.
On brighter note, long ago someone who knew a fair bit about “policy science” (as it used to called) told me that policy made in haste is a policy disaster in the making. And oh boy, are there a shed load of disasters on the way!
Your conclusion is spot on!
One of the best Martin Rowson cartoons was quite early in the coalition. It showed Osborne standing at a Whitehall window, swinging his Wrecker’s Lantern. Neatly summed up the Tory strategy, I thought.
Once a Bullingdon boy always a Bullingdon boy.
In the case of the lenient regulator and the revolving door I think it was Upton Sinclair who said, “it is difficult to get a men to understand something when his salary depends on his not understanding it”.
One of the necessary accompaniments to capitalism in a democratic society is political corruption.
It always amazes me that the Torys’ massive dependency on donations from the City is not exposed and attacked over and over again. Its a straight forward case of politicians being bought by financial interests. Corruption in other words, but without bothering without the brown envelopes.
I have raised this time & again in the Guardian and other media outlets – I have compared Uk governments (& I don’t think the last Labour gov was much less corrupt) to the worst of the latin American banana republics in terms of corruption – and yet – the shameless show goes on – and few seem to give a damn..