28/06/2012 Newsnight Scotland


28/06/2012

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but they have done an awful lot. No. 1 in reform. Tonight, after the

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2008 banking crisis we were told that banks were cleaning up their

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act but does what has happened at Barclays show that casino

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capitalism is still the dominant force in the financial system?

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Good evening. Today, Barclays are the villains with calls for Bob

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Diamond to resign over how dealers at the Bank manipulated lending

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rates. However, 16 other banks are under investigation for the same

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thing, including HSBC and RBS. What does this tell us about the

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morality of an industry that has already brought the world's economy

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to its knees? September 2007, Iran on the banks.

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People panic, queuing to get money out of Northern Rock. -- a run.

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Months later it was nationalised but it turned out this was not the

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only bank in crisis. In 2008, the Treasury poured �37 billion worth

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of taxpayers' money into roll-back of Scotland, Lloyds TSB and HBOS,

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to avert the collapse of the financial sector. -- Royal Bank of

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Scotland. What followed was public anger. The banks were told to clean

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up their act. So there were apologies. Public wringing of hands,

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and mea culpas. We are profoundly, unreservedly sorry. We were

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particularly concerned about the serious impact on shareholders,

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staff and the anxiety caused to customers. The a a profound and

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unqualified apology for the distress caused. -- there is a

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profound. And they are sorry at what has happened at HBOS. It has

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affected shareholders and colleagues, and communities in

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which we live and surf. It has affected taxpayers. We are

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extremely sorry for the events that have brought this about. Since then,

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what had actually changed? It is tempting with the headlines we have

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seen to say it is the same old banks making the same mistakes, and

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for them a lot has changed. Particularly, they are required to

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carry more or safety buffering in capital terms, which makes it more

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expensive to do business. Their loan books have struggled through

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the downturn, because their customers are in trouble. For those

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reasons, Costa going up. They pass the cost on to consumers. We have

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required them to take fewer of the really reckless gambles that they

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were taking in the good years. As a result, they have become unpopular

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because credit is now tied. tight. This has been a disastrous

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week for British banking. Thousands of account holders with RBS and

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NatWest have lost out. Because of a computer software -- computer

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software upgrade that went wrong. The taxpayer's own large chunks of

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these banks and they have had trouble accessing their money. Some

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have not had wages paid on time, which means the bills have not been

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paid and people have suffered. Yesterday, Barclays was fined �290

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million for deliberately fixing the lending rates set between the banks.

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But were the banks not meant to have turned over a new leaf? If you

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look at the problems for RBS over the last week with communications

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issues, very different set of issues from those that Barclays

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have faced. One is an IT fiasco and the other is a very serious scandal.

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What they have got in common is the issue of trust. And there is the

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cost to the customer. How are we coping? We are seeing the same

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issues that we saw four years ago. High interest rates, for that

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payments, high interest charges on overdrafts, particularly on

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authorised overdrafts, we are still seeing banks not responding to

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complaints as we would expect them to. Basically, it is business as

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usual. So are there more money worries to

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come? You can be sure that after Barclays, many banks, not just in

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Britain and not just in the City of London, are going to be drawn in.

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Big fines will be paid and reputations will be getting

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shredded. There have been plenty of apologies

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in recent days. It sounds like the could be more from others in the

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future. -- there could be more.

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Catriona Renton. I am joined by the Labour peer, Lord McFall, former

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chair of the Treasury Select Committee involved in trying to set

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up a new high-speed -- high-street bank, unsuccessfully as it turns

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out. In Edinburgh, financial journalist Ian Fraser, and Ben

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Thompson is the former Chief Executive of Investment Bank. --

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investment bank, Novo Group. Ian Fraser, this abuse of public trust,

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this contempt for customers. Does trust count for nothing in banking?

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I think the banks have sacrificed trust over the past two decades,

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particularly in the past decade. You just have to look at how the

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banks have behaved in a number of different areas including the

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scandal with rigging of LIBOR. The failure of the UK government, the

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Labour government between 1997 and 2009, the failure to properly

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regulate the financial services sector. They entered the race to

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the bottom. This decision, made by Gordon Brown and Tony Blair around

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2002, to pick up business from the US as a result of an Act passed in

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that year before the collapse of Enron and other businesses, I hope

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this is not too long-winded... are basically saying that America

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tried to clean up its act and Britain said we will head off in

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the other direction. They exactly. Tony Blair and Gordon Brown made

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that choice and are reaping the consequences.

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Do you accept that? Why was there such a light touch in regulation?

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except that the mantra was light touch regulation and the banks went

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with it because the integrity of banks was not questioned. But what

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we see today is a game changer. Both in terms of the integrity of

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the market, and also the market pricing, which was raided. One

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SA80s a game changer, -- when I say it is a game changer, we cannot

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just allow an inquiry, with a few recommendations. What we need is a

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judicial inquiry into the whole system. I wanted a Royal Commission

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when the banking crisis erupted. That was not accepted. Now it has

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gone so far that we need that a judicial inquiry. Should Bob

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Diamond resigns? It is a deeper issue. It is the culture of the

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institution. Does that send out a specific message if he does not

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resign? I think so because corporate governance that Barclays

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has failed. They need personal responsibility, whether it is the

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chair and himself or both. What is interesting about this changing --

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trading, that is not a criminal offence under FSA regulation.

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have been in the company of the Chief Executive of the deficit this

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morning. And I made the point to him but they have to go further. --

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Chief Executive of the FSA. Today, the story was in not taking his

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bonus, Bob Diamond, and that is totally inadequate. Keep in mind

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that the American signed -- American side find them $240

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million and we only find them �60 million. Do you think that the

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regulation should happen sooner rather than later? Yes. If this was

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left -- this was left to the market and the Bankers Association and now

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the Government have to step in and say that we need to ensure that

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this system is more robust and has integrity to it. It was dependent

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on the honesty of the banks saying what their day-to-day lending rate

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would be. Which, now, counts for nothing. Exactly, that is why there

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is edition -- deeper issue. We have heard so often about the Masters of

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the universe mentality in the industry. Do you think people

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working in investment banking thought themselves above the law

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because most often they are? think the culture of investment

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banking is not fit within a commercial bank. Vickers was on the

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right track when he did his report but he did not go far enough. We

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need to separate commercial banking from investment banking. The

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culture of bonuses and profit taking and investment banking

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should not be next with what should be vanilla commercial banking were

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people make loans and take deposits. The attitude of integrity and trust

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in a traditional bank is what we How do we regulate the behaviour of

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the likes of the derivatives traders? I do not think that is

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part of the bank. It is not a question of size. It is a question

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of the mindset of an investment banker, which is very different to

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a commercial banker. This is exactly the same thing which

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happened in the 1930s. You have to separate out the commercial bank

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from an investment bank. We have to go back to recognising that these

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two cultures do not mix, no matter how much you regulate. In the end,

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you have to find you have to separate the two. Let us talk about

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the customers. They are having problems of mortgages and personal

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loans. Do you think some mechanism for compensation should be

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structured for then? Even if there are no criminal cases coming out of

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this, should there be some civil action? I think this fig leaf that

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this was done privately between the banks and the British Bankers

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Association means that there will not be criminal cases against them.

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But I think this could open the floodgates for lawsuits across the

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world. But any relationship between a customer and the banks between

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2005 and 2009 could actually be challenged in the courts. As was

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said earlier in the programme, it is the nuclear bomb. HSBC, America

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seems a lot more structured in its response to a situation such as

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this. One G think we could learn from America? They are are lax as

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regards regulation. We have to admit this is a long-term problem

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with our banking. We have got to professional lives and banking,

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whether it is retail banking or investment banking. There needs to

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be professional standards, so that people can be disciplined. If you

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look at other organisations, it was about their culture, their

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behaviour and their competence. It is simple. What we see about

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Barclays to date is that the culture and behaviour were totally

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unacceptable. Do you accept that the what an American commentator

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said today that the government, particularly Labour, was far too

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cosy with the financial sector? When I was chairman of the Treasury

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committee, as could see that banking was this global entity and

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was needed to be regulated by a general set of rules. At the time,

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it was given that what was happening in banking was too

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complex for the ordinary person to understand. But what was going on

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was not actually beyond any means of understanding of a person with

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an inquisitive mind. That is the issue. That is the source of all

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the problems here. Once you swipe that away, you can begin to

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understand exactly what has been heartening. Other banks are being

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investigated. The regulators have indicated to the BBC that the banks

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are not co-operating as fully as Barclays dead. Barclays has taken a

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big hit and this because it has come out first. What does the non

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co-operation of other banks say about bankers attitudes to any sort

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of regulation or investigation? I do think that no one likes to

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come out and and that their problems. Barclays obviously

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realise this was going to come out and decided to come clean force. We

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will see in the next few weeks the more banks are forced to do this.

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The scrutiny will turn up on them. The extent of the e-mails between

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traders and other banks will come to light. I do not think they will

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be able to hide for long. I think in the next few weeks we will see a

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number of other announcements. Another thing we are expecting

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tomorrow, if financial services are so she shared about a possible

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insurance scam, which may well involve RBS. This is much bigger

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than many other scandals, as it will affect many small businesses.

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This was from 2005 to 2009, when a number of UK banks were no selling

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these interest-rate swaps or Nice debt systemic business to their

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smaller major customers and a lot of them have been destroyed or put

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out of business and had homes repossessed, etc, because of the

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Bank's behaviour. It is quite pleasing that the FSA has decided

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to respond to the public clamour for an investigation about this. In

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other instances of Bank I more or misbehaviour, it has taken years to

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have any sort of response. It shows that they are now responding well

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when there is a wealth of evidence supporting something. Finally, at

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Lord McFall, you had been interested in setting up a new bank,

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which has not been successful. I was with the German ambassador or

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a couple of weeks ago and said that they have devolution of banks. They

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have small banks serving manufacturing industry and that is

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what we need in this country. The manufacturing industry has not been

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best served by the set-up at the moment. We need a fundamental

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change. The Government have to get a grip of this and put any 15-20

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you plant to get this back on track. What is banking about? It is about

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delivering economic respect to individuals and to businesses. We

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have failed to do that and that is the root problem here. It is about

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the culture and banking. Dewi have to leave it there. Think you're

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very much. A quick look at tomorrow's papers. The helped his

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stocky about rail chaos as Scotland is cut off by it landslides and the

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Scotsman Leeds with fraud Office called in over Berkeley scandal. In

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