Fixed Rates

By DeusExMacintosh

Barclays LIBOR scandal

The Governor of the Bank of England has launched a scathing attack on “deceitful” investment banking and called for a “real change in the culture of the industry” stretching right to the top, in the wake of the Barclays rate-fixing scandal.

Sir Mervyn King, who refused to back Barclays chief executive Bob Diamond, added that the behaviour of Barclays’ traders underlined the need to separate high street banking from casino trading operations.

“What I hope is that everyone now understands that something went very wrong with the UK banking industry and we now need to put it right,” he said. “From excessive levels of compensation, to shoddy treatment of customers, to deceitful manipulation of one of the most important interest rates.

“We can see that we need a real change in the culture of the industry. And that will require two things, one is leadership of an unusually high order and [the other is] changes to the structure of the industry.”

Sir Mervyn’s comments came just days after Barclays was hit with record fines of £290m for trying to rig the inter-bank interest rate, and on the morning that regulators ordered several major banks to compensate small businesses who were mis-sold complex financial instruments pushed by their investment bankers.

At the Financial Stability Report press conference, the Governor twice refused to comment on whether Mr Diamond was a “fit and proper” person to be running Barclays. “That is for another day and another place,” he said. Mr Diamond is facing calls to resign over the scandal…

Lord Turner, chairman of the Financial Services Authority, said the cultural problem in investment banking was not limited to the rates teams caught up in the Libor fixing scandal.

Condemning Barclays for its behaviour, he said: “There is a degree of cynicism and greed that is quite shocking. I think we would be fooling ourselves if we thought that some of the behaviour and culture evidenced in Libor fixing are not found in some other areas of trading activity as well.”

The Telegraph

Although as Jeremy Warner point out in his comment piece, Sir Merv is perhaps NOT the best placed to complain about market fixing

12 Comments

  1. Posted June 30, 2012 at 1:22 pm | Permalink

    Peter Warner’s piece is deeply silly. There is a big difference in setting the base interest rate according to a public target and in a process whose minutes are published (albeit after a delay) and simply lying.

    Sir Mervyn is being as pointed about Barclays appalling behaviour as one can expect a Governor of the Bank of England to be, and good on him.

  2. kvd
    Posted June 30, 2012 at 2:21 pm | Permalink

    All of Jeremy Warner’s pieces are deeply silly. But I must admit a wry smile at Lord Turner’s “quite shocking” comment. As chairman of the FSA, to be so shocked at this late stage is, of itself, deeply shocking.

    And as for King, anyone who can say with a straight face “What I hope is that everyone now understands that something went very wrong with the UK banking industry and we now need to put it right” deserves a second knighthood for acting.

  3. Posted June 30, 2012 at 4:36 pm | Permalink

    Yes, you do wonder whether Lord Turner has been paying attention for the last 2 years…

  4. kvd
    Posted July 1, 2012 at 6:57 am | Permalink

    Still puzzling over DEM’s meaning in saying “the greatest failings of British banks were the lack of any”?

    Redolent of the language system of the Nanti of southern Peru, whereby Indicative verbs in positive polarity clauses with nonfuture
    temporal reference take realis marking, while verbs in negated, counterfactual, and hypothetical
    clauses, or ones with future temporal reference take irrealis marking. Must get another coffee…

  5. Posted July 1, 2012 at 7:08 am | Permalink

    Great funnie. You’re obviously on fire with this new puter.

  6. Posted July 1, 2012 at 2:36 pm | Permalink

    I read it as ‘weren’t doing any actual banking’, which they weren’t. But I have a very blunt and literal sense of humour, unless it’s the cryptic, which isn’t necessarily funny, just clever.

  7. Posted July 1, 2012 at 3:20 pm | Permalink

    You could also read it as ‘the lack of any failures’, because right now the Ron Paul-esque argument ‘we should have let the bastards fail’ is starting to look more and more reasonable.

  8. kvd
    Posted July 1, 2012 at 3:23 pm | Permalink

    [email protected] yes, that was my reading, but it didn’t fit with the current mood. So then I thought, maybe “lack of any banks” – which has some merit if you are as old fashioned as I presently seem to be.

  9. Posted July 2, 2012 at 12:01 am | Permalink

    The LIBOR rigging struck me as the point where popular opinion reached the “let the bastards fail” moment in the UK. Keep in mind that the Australian mood will be slightly different as your government hasn’t spent the previous two years using ‘necessary austerity’ and debt reduction to justify swingeing cuts in public services. We’re not at the stage of Greece, but the discussions about what needs to be done have been getting pretty poisonous (and now I’m going to go and write one hundred times “I will not mention welfare reform”).

  10. Patrick
    Posted July 2, 2012 at 5:15 am | Permalink

    Ron Paul was right on that, all along. Nothing is worse to my mind than the concept of ‘too big to fail’.

    If it is that big, shoot it.

  11. Posted July 2, 2012 at 8:09 am | Permalink

    The “too big to fail” …
    Yes. Let them fail (there is an implicit subsidy of bank borrowing rates with the “too big to fail” discount … see the recent http://www.voxeu.org/article/implicit-subsidy-banks that quantifies it – or tries to, by different approaches with different results).
    I’ll disagree from a lefty perspective with a fair bit of Ron Paul says, but there is a lot to like..

    It will be interesting to see if the number of rolling heads from these shenanigans will be even a tiny fraction of those who would have had to have known.

One Trackback

  1. […] the Barclays Bank scandal where it systematically lied to manipulate market information, leading to scathing comments from the Governor of the Bank of England. Barclay’s corrupted social processes in quite a […]

Post a Comment

Your email is never published nor shared. Required fields are marked *

*
*