It’s been like “manna from heaven” for newspaper journalists, columnists, and the news-hungry public.
However, there is a limit to how much anger and indignation we can actually take and that limit is when virtually each and every meeting starts with a comment or a question on the latest financial sector revelations gleaned from the daily newspapers. There just seems to be no end to it, from Barclays being fined $450m for manipulating the Libor rate to Barclays thinking its CEO could actually weather the storm.
Bob Diamond’s salary for the current year was £17m and his earnings since 2005 are reported to have been £100m. Insult to injury was then added when the bankers tried to blame the Bank of England for “sort of” encouraging them to manipulate the rate and to also suggesting that since all of the other 16 banks were doing it so should they. Fortunately, Diamond appears to have seen fit not to try and have £20m of share options vested. Mind you, he still gets to walk away with £2m.
That and a lot of other things do show something has fundamentally gone wrong with banking. Bankers, bank directors, and indeed shareholders, before they were also shafted, at least in the Irish banks, have lost the plot and have effectively forgotten the reason they were established. That reason was to serve their customers and facilitate financial transactions and not simply to enrich themselves at the expense of the customers.
Finally, Finance Minister Michael Noonan realised the various proverbial kings were wearing no clothes when he said last week that “you cannot believe anything that a banker tells you”. Paul Tucker, deputy governor of the Bank of England, echoed that view.
Of course, while most of us already long believed that statement to be correct, it begs the question why we tolerate it. The former Anglo Irish and Irish Nationwide are defunct and are waiting to be put to sleep wearing camouflage. AIB is owned by the State and Bank of Ireland has the State as a 15% partner and a guarantor of depositors.
We need functioning banks doing what they should be doing. In recent times banks have been akin to casinos, where the punter virtually always loses and the croupier walks away wealthy and apparently immune from prosecution.
This state of affairs cannot just go on indefinitely. It is well past time that banks went back to the basics.
Restructuring is urgently required and it may have to be that the banks are dragged roaring and screaming into a new paradigm. If that is the case, then so be it. If it gets too hot in the kitchen there are plenty other would-be cooks out there, probably hungrier and more eager to please their new owners. Even more importantly they are also less tainted by the excesses of their predecessors.
Let’s start with a with-teeth inquiry into what happened and how since 2007. It needs to be by independent professionals. Unqualified TDs with their own political agendas won’t do.
Investment and retail banking needs to be completely separated, and regulation and oversight for both dramatically increased. Given the debacle in the Ulster Bank our banking sector must also be fit for purpose.
Oversight must be objective and effective and not swayed by short-term commercial political objectives. In fact, it is best there be no political control under any guise whatsoever.
Most importantly we need a lot more idealism and a lot less pragmatism, cynicism, and greed. It’s not going to be an easy job but as they say, someone has to do it.