Just when we hoped that the banking sector might be getting their house in order comes the scandal of interest rate fixing.
There are plenty of honest people involved in banking who work hard at jobs which do not attract the huge salaries and bonuses with which Merchant Banking is coming to be associated. It's a great shame that many of them will be tarred with the same brush as those bankers who have been less exemplary in their attention to the rules of sound business or basic ethics.
If anyone in Britain - or the other countries affected - were in any doubt that things have gone seriously wrong in the culture of some parts of our banking sectors, the LIBOR scandal would have destroyed such doubts.
How can you explain to an unemployed person who has been looking hard for months for a job, or to someone who is working all the hours God sends for £15,000 a year, or anyone struggling to put food on their children's table and pay the rent or mortgage, that people who are paid more in a week than they get in a year think it is OK to tell lies to rig markets so that they can have even more money?
This sort of culture will not change until and unless the people involved are held personally liable for their actions - which should mean not just the sack, but jail time. I don't underestimate the difficulty of bringing successful prosecutions, but if it is impractical to convict the people behind the LIBOR fixing scam of any criminal offence then we need to look at whether the present legal definition of fraud is adequate.
Apparently the Serious Fraud Office is considering whether the LIBOR case is within their remit. When you look at the criteria on the SFO website for what cases they should handle, the answers are almost embarrassingly obvious. E.g. (my answers as they affect this case in italics to the questions on the SFO website in plain) ...
The key factors we consider before taking on a case:
- Does the value of the alleged fraud exceed £1 million?
- Is there a significant international dimension?
- Is the case likely to be of widespread public concern?
- Does the case require highly specialised knowledge, for example, of financial markets?
- Is there a need to use the SFO's special powers, such as Section 2 of the Criminal Justice Act?
Serious and complex: what do we look for?
In addition to the above criteria we look for factors such as:
Is it serious?
- Whether the fraud will impact on the integrity of the financial market
- Whether there is a wider group than shareholders or creditors who have lost money as a result of the alleged fraud
... and so it goes on.
There has to be seen to be firm and decisive action to punish the wrongdoers or there will be a collapse of confidence.