Browse content similar to 28/06/2012. Check below for episodes and series from the same categories and more!
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but they have done an awful lot. No. 1 in reform. Tonight, after the | :00:16. | :00:19. | |
2008 banking crisis we were told that banks were cleaning up their | :00:19. | :00:22. | |
act but does what has happened at Barclays show that casino | :00:22. | :00:26. | |
capitalism is still the dominant force in the financial system? | :00:26. | :00:30. | |
Good evening. Today, Barclays are the villains with calls for Bob | :00:30. | :00:34. | |
Diamond to resign over how dealers at the Bank manipulated lending | :00:34. | :00:38. | |
rates. However, 16 other banks are under investigation for the same | :00:38. | :00:44. | |
thing, including HSBC and RBS. What does this tell us about the | :00:44. | :00:47. | |
morality of an industry that has already brought the world's economy | :00:47. | :00:57. | |
:00:57. | :00:58. | ||
to its knees? September 2007, Iran on the banks. | :00:58. | :01:03. | |
People panic, queuing to get money out of Northern Rock. -- a run. | :01:03. | :01:06. | |
Months later it was nationalised but it turned out this was not the | :01:06. | :01:13. | |
only bank in crisis. In 2008, the Treasury poured �37 billion worth | :01:14. | :01:20. | |
of taxpayers' money into roll-back of Scotland, Lloyds TSB and HBOS, | :01:20. | :01:25. | |
to avert the collapse of the financial sector. -- Royal Bank of | :01:25. | :01:29. | |
Scotland. What followed was public anger. The banks were told to clean | :01:29. | :01:37. | |
up their act. So there were apologies. Public wringing of hands, | :01:37. | :01:46. | |
and mea culpas. We are profoundly, unreservedly sorry. We were | :01:46. | :01:52. | |
particularly concerned about the serious impact on shareholders, | :01:52. | :02:01. | |
staff and the anxiety caused to customers. The a a profound and | :02:01. | :02:05. | |
unqualified apology for the distress caused. -- there is a | :02:05. | :02:13. | |
profound. And they are sorry at what has happened at HBOS. It has | :02:13. | :02:16. | |
affected shareholders and colleagues, and communities in | :02:16. | :02:21. | |
which we live and surf. It has affected taxpayers. We are | :02:21. | :02:25. | |
extremely sorry for the events that have brought this about. Since then, | :02:25. | :02:31. | |
what had actually changed? It is tempting with the headlines we have | :02:31. | :02:35. | |
seen to say it is the same old banks making the same mistakes, and | :02:35. | :02:40. | |
for them a lot has changed. Particularly, they are required to | :02:40. | :02:44. | |
carry more or safety buffering in capital terms, which makes it more | :02:44. | :02:49. | |
expensive to do business. Their loan books have struggled through | :02:49. | :02:53. | |
the downturn, because their customers are in trouble. For those | :02:53. | :02:58. | |
reasons, Costa going up. They pass the cost on to consumers. We have | :02:58. | :03:03. | |
required them to take fewer of the really reckless gambles that they | :03:03. | :03:08. | |
were taking in the good years. As a result, they have become unpopular | :03:08. | :03:15. | |
because credit is now tied. tight. This has been a disastrous | :03:15. | :03:19. | |
week for British banking. Thousands of account holders with RBS and | :03:19. | :03:23. | |
NatWest have lost out. Because of a computer software -- computer | :03:24. | :03:28. | |
software upgrade that went wrong. The taxpayer's own large chunks of | :03:28. | :03:35. | |
these banks and they have had trouble accessing their money. Some | :03:35. | :03:38. | |
have not had wages paid on time, which means the bills have not been | :03:38. | :03:46. | |
paid and people have suffered. Yesterday, Barclays was fined �290 | :03:46. | :03:51. | |
million for deliberately fixing the lending rates set between the banks. | :03:51. | :03:56. | |
But were the banks not meant to have turned over a new leaf? If you | :03:56. | :03:59. | |
look at the problems for RBS over the last week with communications | :03:59. | :04:04. | |
issues, very different set of issues from those that Barclays | :04:04. | :04:14. | |
:04:14. | :04:14. | ||
have faced. One is an IT fiasco and the other is a very serious scandal. | :04:15. | :04:21. | |
What they have got in common is the issue of trust. And there is the | :04:21. | :04:24. | |
cost to the customer. How are we coping? We are seeing the same | :04:24. | :04:29. | |
issues that we saw four years ago. High interest rates, for that | :04:30. | :04:35. | |
payments, high interest charges on overdrafts, particularly on | :04:35. | :04:38. | |
authorised overdrafts, we are still seeing banks not responding to | :04:38. | :04:42. | |
complaints as we would expect them to. Basically, it is business as | :04:42. | :04:46. | |
usual. So are there more money worries to | :04:46. | :04:52. | |
come? You can be sure that after Barclays, many banks, not just in | :04:52. | :04:56. | |
Britain and not just in the City of London, are going to be drawn in. | :04:56. | :04:59. | |
Big fines will be paid and reputations will be getting | :04:59. | :05:03. | |
shredded. There have been plenty of apologies | :05:03. | :05:06. | |
in recent days. It sounds like the could be more from others in the | :05:06. | :05:10. | |
future. -- there could be more. | :05:10. | :05:15. | |
Catriona Renton. I am joined by the Labour peer, Lord McFall, former | :05:15. | :05:19. | |
chair of the Treasury Select Committee involved in trying to set | :05:19. | :05:24. | |
up a new high-speed -- high-street bank, unsuccessfully as it turns | :05:24. | :05:28. | |
out. In Edinburgh, financial journalist Ian Fraser, and Ben | :05:28. | :05:32. | |
Thompson is the former Chief Executive of Investment Bank. -- | :05:32. | :05:38. | |
investment bank, Novo Group. Ian Fraser, this abuse of public trust, | :05:38. | :05:43. | |
this contempt for customers. Does trust count for nothing in banking? | :05:43. | :05:50. | |
I think the banks have sacrificed trust over the past two decades, | :05:50. | :05:54. | |
particularly in the past decade. You just have to look at how the | :05:54. | :06:02. | |
banks have behaved in a number of different areas including the | :06:02. | :06:10. | |
scandal with rigging of LIBOR. The failure of the UK government, the | :06:10. | :06:17. | |
Labour government between 1997 and 2009, the failure to properly | :06:17. | :06:20. | |
regulate the financial services sector. They entered the race to | :06:20. | :06:30. | |
:06:30. | :06:34. | ||
the bottom. This decision, made by Gordon Brown and Tony Blair around | :06:34. | :06:41. | |
2002, to pick up business from the US as a result of an Act passed in | :06:41. | :06:46. | |
that year before the collapse of Enron and other businesses, I hope | :06:46. | :06:50. | |
this is not too long-winded... are basically saying that America | :06:50. | :06:54. | |
tried to clean up its act and Britain said we will head off in | :06:54. | :06:57. | |
the other direction. They exactly. Tony Blair and Gordon Brown made | :06:57. | :07:01. | |
that choice and are reaping the consequences. | :07:01. | :07:06. | |
Do you accept that? Why was there such a light touch in regulation? | :07:06. | :07:11. | |
except that the mantra was light touch regulation and the banks went | :07:11. | :07:14. | |
with it because the integrity of banks was not questioned. But what | :07:14. | :07:19. | |
we see today is a game changer. Both in terms of the integrity of | :07:19. | :07:25. | |
the market, and also the market pricing, which was raided. One | :07:26. | :07:32. | |
SA80s a game changer, -- when I say it is a game changer, we cannot | :07:32. | :07:37. | |
just allow an inquiry, with a few recommendations. What we need is a | :07:38. | :07:42. | |
judicial inquiry into the whole system. I wanted a Royal Commission | :07:42. | :07:48. | |
when the banking crisis erupted. That was not accepted. Now it has | :07:48. | :07:52. | |
gone so far that we need that a judicial inquiry. Should Bob | :07:52. | :07:59. | |
Diamond resigns? It is a deeper issue. It is the culture of the | :07:59. | :08:03. | |
institution. Does that send out a specific message if he does not | :08:03. | :08:06. | |
resign? I think so because corporate governance that Barclays | :08:06. | :08:11. | |
has failed. They need personal responsibility, whether it is the | :08:11. | :08:17. | |
chair and himself or both. What is interesting about this changing -- | :08:17. | :08:23. | |
trading, that is not a criminal offence under FSA regulation. | :08:23. | :08:26. | |
have been in the company of the Chief Executive of the deficit this | :08:26. | :08:33. | |
morning. And I made the point to him but they have to go further. -- | :08:33. | :08:37. | |
Chief Executive of the FSA. Today, the story was in not taking his | :08:37. | :08:43. | |
bonus, Bob Diamond, and that is totally inadequate. Keep in mind | :08:43. | :08:50. | |
that the American signed -- American side find them $240 | :08:50. | :08:55. | |
million and we only find them �60 million. Do you think that the | :08:55. | :09:00. | |
regulation should happen sooner rather than later? Yes. If this was | :09:00. | :09:04. | |
left -- this was left to the market and the Bankers Association and now | :09:04. | :09:08. | |
the Government have to step in and say that we need to ensure that | :09:08. | :09:12. | |
this system is more robust and has integrity to it. It was dependent | :09:12. | :09:16. | |
on the honesty of the banks saying what their day-to-day lending rate | :09:16. | :09:22. | |
would be. Which, now, counts for nothing. Exactly, that is why there | :09:22. | :09:29. | |
is edition -- deeper issue. We have heard so often about the Masters of | :09:29. | :09:32. | |
the universe mentality in the industry. Do you think people | :09:32. | :09:35. | |
working in investment banking thought themselves above the law | :09:35. | :09:39. | |
because most often they are? think the culture of investment | :09:39. | :09:45. | |
banking is not fit within a commercial bank. Vickers was on the | :09:45. | :09:48. | |
right track when he did his report but he did not go far enough. We | :09:49. | :09:52. | |
need to separate commercial banking from investment banking. The | :09:52. | :09:55. | |
culture of bonuses and profit taking and investment banking | :09:55. | :10:01. | |
should not be next with what should be vanilla commercial banking were | :10:01. | :10:08. | |
people make loans and take deposits. The attitude of integrity and trust | :10:08. | :10:18. | |
in a traditional bank is what we How do we regulate the behaviour of | :10:18. | :10:23. | |
the likes of the derivatives traders? I do not think that is | :10:23. | :10:33. | |
part of the bank. It is not a question of size. It is a question | :10:33. | :10:36. | |
of the mindset of an investment banker, which is very different to | :10:36. | :10:42. | |
a commercial banker. This is exactly the same thing which | :10:42. | :10:50. | |
happened in the 1930s. You have to separate out the commercial bank | :10:50. | :10:54. | |
from an investment bank. We have to go back to recognising that these | :10:54. | :10:59. | |
two cultures do not mix, no matter how much you regulate. In the end, | :11:00. | :11:06. | |
you have to find you have to separate the two. Let us talk about | :11:06. | :11:12. | |
the customers. They are having problems of mortgages and personal | :11:12. | :11:18. | |
loans. Do you think some mechanism for compensation should be | :11:18. | :11:22. | |
structured for then? Even if there are no criminal cases coming out of | :11:22. | :11:32. | |
:11:32. | :11:33. | ||
this, should there be some civil action? I think this fig leaf that | :11:33. | :11:40. | |
this was done privately between the banks and the British Bankers | :11:40. | :11:45. | |
Association means that there will not be criminal cases against them. | :11:45. | :11:49. | |
But I think this could open the floodgates for lawsuits across the | :11:49. | :11:59. | |
:11:59. | :12:03. | ||
world. But any relationship between a customer and the banks between | :12:03. | :12:09. | |
2005 and 2009 could actually be challenged in the courts. As was | :12:09. | :12:19. | |
:12:19. | :12:21. | ||
said earlier in the programme, it is the nuclear bomb. HSBC, America | :12:21. | :12:25. | |
seems a lot more structured in its response to a situation such as | :12:25. | :12:35. | |
:12:35. | :12:45. | ||
this. One G think we could learn from America? They are are lax as | :12:45. | :12:50. | |
regards regulation. We have to admit this is a long-term problem | :12:50. | :12:57. | |
with our banking. We have got to professional lives and banking, | :12:57. | :13:05. | |
whether it is retail banking or investment banking. There needs to | :13:05. | :13:10. | |
be professional standards, so that people can be disciplined. If you | :13:10. | :13:17. | |
look at other organisations, it was about their culture, their | :13:17. | :13:22. | |
behaviour and their competence. It is simple. What we see about | :13:22. | :13:25. | |
Barclays to date is that the culture and behaviour were totally | :13:25. | :13:33. | |
unacceptable. Do you accept that the what an American commentator | :13:33. | :13:41. | |
said today that the government, particularly Labour, was far too | :13:41. | :13:50. | |
cosy with the financial sector? When I was chairman of the Treasury | :13:50. | :13:58. | |
committee, as could see that banking was this global entity and | :13:59. | :14:05. | |
was needed to be regulated by a general set of rules. At the time, | :14:05. | :14:09. | |
it was given that what was happening in banking was too | :14:09. | :14:19. | |
complex for the ordinary person to understand. But what was going on | :14:19. | :14:25. | |
was not actually beyond any means of understanding of a person with | :14:25. | :14:33. | |
an inquisitive mind. That is the issue. That is the source of all | :14:33. | :14:39. | |
the problems here. Once you swipe that away, you can begin to | :14:39. | :14:44. | |
understand exactly what has been heartening. Other banks are being | :14:44. | :14:49. | |
investigated. The regulators have indicated to the BBC that the banks | :14:49. | :14:54. | |
are not co-operating as fully as Barclays dead. Barclays has taken a | :14:54. | :15:00. | |
big hit and this because it has come out first. What does the non | :15:00. | :15:04. | |
co-operation of other banks say about bankers attitudes to any sort | :15:04. | :15:10. | |
of regulation or investigation? I do think that no one likes to | :15:10. | :15:14. | |
come out and and that their problems. Barclays obviously | :15:14. | :15:18. | |
realise this was going to come out and decided to come clean force. We | :15:18. | :15:22. | |
will see in the next few weeks the more banks are forced to do this. | :15:23. | :15:28. | |
The scrutiny will turn up on them. The extent of the e-mails between | :15:28. | :15:31. | |
traders and other banks will come to light. I do not think they will | :15:31. | :15:36. | |
be able to hide for long. I think in the next few weeks we will see a | :15:36. | :15:42. | |
number of other announcements. Another thing we are expecting | :15:42. | :15:49. | |
tomorrow, if financial services are so she shared about a possible | :15:49. | :15:59. | |
:15:59. | :16:03. | ||
insurance scam, which may well involve RBS. This is much bigger | :16:03. | :16:09. | |
than many other scandals, as it will affect many small businesses. | :16:09. | :16:18. | |
This was from 2005 to 2009, when a number of UK banks were no selling | :16:18. | :16:23. | |
these interest-rate swaps or Nice debt systemic business to their | :16:23. | :16:28. | |
smaller major customers and a lot of them have been destroyed or put | :16:28. | :16:34. | |
out of business and had homes repossessed, etc, because of the | :16:34. | :16:40. | |
Bank's behaviour. It is quite pleasing that the FSA has decided | :16:40. | :16:45. | |
to respond to the public clamour for an investigation about this. In | :16:45. | :16:50. | |
other instances of Bank I more or misbehaviour, it has taken years to | :16:50. | :16:55. | |
have any sort of response. It shows that they are now responding well | :16:55. | :17:05. | |
:17:05. | :17:08. | ||
when there is a wealth of evidence supporting something. Finally, at | :17:08. | :17:12. | |
Lord McFall, you had been interested in setting up a new bank, | :17:12. | :17:20. | |
which has not been successful. I was with the German ambassador or | :17:20. | :17:26. | |
a couple of weeks ago and said that they have devolution of banks. They | :17:26. | :17:30. | |
have small banks serving manufacturing industry and that is | :17:30. | :17:35. | |
what we need in this country. The manufacturing industry has not been | :17:35. | :17:40. | |
best served by the set-up at the moment. We need a fundamental | :17:40. | :17:46. | |
change. The Government have to get a grip of this and put any 15-20 | :17:46. | :17:52. | |
you plant to get this back on track. What is banking about? It is about | :17:52. | :17:56. | |
delivering economic respect to individuals and to businesses. We | :17:56. | :18:01. | |
have failed to do that and that is the root problem here. It is about | :18:01. | :18:07. | |
the culture and banking. Dewi have to leave it there. Think you're | :18:07. | :18:14. | |
very much. A quick look at tomorrow's papers. The helped his | :18:14. | :18:19. | |
stocky about rail chaos as Scotland is cut off by it landslides and the | :18:19. | :18:23. | |
Scotsman Leeds with fraud Office called in over Berkeley scandal. In | :18:23. | :18:28. |