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A wholesale reconstruction of the industry

So there are two big stories in the UK media right now – the RBS/NatWest glitch and the Barclays LIBOR fine.

There are two others: the PPI scandal that rolls on and on, and the new generation SWAPS scandal which is just starting.

Then there are the ones that are constant: the fact that free banking is going to disappear, the instability of banks, bank bonusesinsider dealing, along with corruption and greed generally.

These all build into a very big, bad cloud of crap.

In fact, the crap has hit the fan and I find it incalculable to see how banks will regain their reputational hit.

It is indefensible.

But here are the defences.

The Barclays LIBOR fine: everyone was doing this.

The PPI scandal: everyone was doing this.

The SWAPS scandal: everyone was doing this.

Bank bonuses: everyone was doing this.

Free banking: everyone was doing this.

Credit default swaps that created the credit crisis: everyone was doing this.

So we have an industry that is fundamentally at a crossroads.

I joined this industry three decades ago and the mantra then was everyone was doing this.

In fact, I was told a story very early on by a senior banker that banks are like the herd of swine in the Bible (Luke, 8:30-33):

“Jesus asked him, “What is your name?”

“Legion,” he replied, because many demons had gone into him. And they begged Jesus repeatedly not to order them to go into the Abyss.

A large herd of pigs was feeding there on the hillside. The demons begged Jesus to let them go into the pigs, and he gave them permission. 

When the demons came out of the man, they went into the pigs, and the herd rushed down the steep bank into the lake and was drowned.”

They all run together and, when they screw up, they all die together.

So it seems.

But the too big to fail and the too small to survive moment has happened.

The excuse that everyone is doing this no longer works.

It has to end.

As a kid, we all remember saying to mum and dad: can I have one of these?

And they would say: no, it’s too expensive.

We would respond: but so-and-so’s got one, why can’t I?

And they would say: because you’re not so-and-so.

That’s what we need here in banking.

UK Bank: can I misbehave?

UK Government: no.

UK Bank: but all the other banks are doing it, why can’t I?

UK Government: because you’re not all the other banks.

The issue we have today is that UK banks have acted as a collegiate and UK government has been at their behest.

Rather than being parent, the government has been child.

This is what has to change and it requires a wholesale reconstruction of the industry.

So endeth the Friday sermon … see you Monday.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • neil burton

    The industry has been brought into disrepute, by folk who presumably knew that they were lining their pockets at the expense of ‘the little people’; and who knew that financial services is the most important segment of the UK economy. What’s a red card mean in this context?
    The vast majority of the people who work in financial services work to the highest levels of integrity; their reputations and incomes are damaged. The folk on that side of the line need to make sure the line is clearly drawn; the moat dug and the walls built.
    Maybe we should draft in Terry Wogan to run one of the big banks. By which I mean, one small step in the right direction is to require professional qualifications and support professional bodies who can (and do) ban errant practitioners.

  • Steve Waldron

    Yet again during all these years you have to ask where were the controls and supervision, where were the regulators, the internal and external auditors?
    I feel it is high time the FSA were allowed to set up a team just like Eliot Ness and The Untouchables, they have full authority to go into any financial house unannounced and clean up the mess.
    If the FSA had the green light to do this, and pay a team well then this would be a start.
    As already mentioned, there are thousands of decent, hard working and honest people in the financial sector, just like the general public they are equally as fed up with what has been happening in their industry.
    I also believe there will be plenty of good and very smart people who work in the financial sector who would love to be part of a team the FSA put together – inside track and all of that!

  • Chris; You quoted St Lukes Gospel. Let me take another piece of of Liturgy, the immortal words of the General Confession from the 1662 Prayer Book “We have erred and strayed like lost sheep. We have followed too much the devices and desires of our own hearts….we have left undone those things which we ought to have done, and we have done those things which we ought not to have done…..” and so on.
    Let us look at those things that have been largely “left undone that ought to have been done” (yet indeed still can/must be done) especially in underpinning operational/transactional risk and business/trust in the internet era . Helping the very businesses being crucified by IRSA’s etc to survive & prosper in a borderless marketplace where distance and time are measured in bytes
    We (all of the FSC community) have the building block experiences in place, and there are demonstrably operational UK illustrations in the world of underpinning transactions with bank issued identity and trust credentials etc.
    Now, coming out of these horrors should be a concerted effort by governments by banks and by all of us, to deliver what Financial Secretary Mark Hoban MP said on Breakfast TV this mornng
    “We want to see banks underpin our Economy, not undermine it”.
    Kind regards John & all at IdenTrust

  • You’re forgetting a scandal: http://www.rollingstone.com/politics/news/the-scam-wall-street-learned-from-the-mafia-20120620
    My thoughts on (how easy it would be if will was there to fix) LIBOR
    So I guess you think my Financial Reformation idea is a good metaphor!