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 bonuses, insider 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.