10th July 2012
Perhaps the most dispiriting aspect of the whole Barclays debacle is the absence of sensible debate by our political masters. Rather like two bald men fighting over a comb, the parties trade predictable insults over who’s to blame for presumed failures in regulation. All this adds to the growing frustration of a much embittered public trying to make sense of just what happened, and more importantly, what it all means.
And that frustration is clearly well entrenched. On the BBC’s Question Time last week, one member of the audience alluded to the anger ordinary people feel (correct) and referred to those who have lost homes and businesses as a result of rate fixing. This is simply unknowable, as yet, and nothing I have read or reviewed has tried to ‘unpack’ exactly what the implications of rogue fixing has been on markets and individuals over the long term. What is felt implicitly is that something failed to check behaviours that were clearly wrong, morally, ethically, and corporately.
It now seems to me, with a some reluctance admittedly, that the basics of the Vickers proposals to separate retail banking from its commercial and investment cousin is now unanswerable if future reputational damage of the financial sector is to be avoided. Why should this be – simply put no amount of regulation will correct an entrenched unethical culture. Will Hutton has put the malaise more sharply as a culture that allowed ‘men and women…with no moral compass [to] make themselves millionaires in a very short time, [contributing] zero wider economic value. Even if this can be disputed, the revelation earlier this year that Barclays’ bonus pool topped £2bn, whilst shareholders – the riskers of capital – were paid a paltry £800m, shows something is very wrong.
Regulation in effect has acted rather like a cavity wall squeeze gun, insulating everyone around it from exercising personal responsibility. In that sense, more and more regulation, as politician impotently offer, will simply stifle enterprise without affecting the underlying problem of failures in human ethical behaviour.
Where economic activity explicitly incentivises risk and entices reward, the sociological evidence is always the same; some will err and do the wrong thing. Clearly, the lesson of Barclays (and indeed others – let’s not forget the £2bn fine handed out to GSK last week for competition and market abuse), is that something important has gone, call it trust, character, integrity or prudence, for the sake of the short fix and fast buck. We should remember that Barclays has Quaker roots, and if its reformation is to be durable and sincere, it could do worse than re-examine those elemental Quaker first principles.
Ministers would be better placed thinking culturally and behaviourally so as to reconnect banking and economic activity with ethics, so that despite the inherent temptation and presumption of risk taking, it is conducted within a defined moral framework that all understand and adhere to. Any deviation has to be made to be unthinkable, as a personal moral failure.
Unfortunately, the omens are not good; the squabble about what form an enquiry should take misses the point. Ethical reformation is the prize, and business if it is not to forfeit all remaining trust, needs to go back to basics.
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