Libor rigging may spotlight casino banking, but PPI mis-selling shows the staid high-street side is no stranger to scandal
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Yachts at the Monaco Yacht Show … where's ours? Photograph: Sebastien Nogier/EPA
At the Lib Dem conference this week I bumped into an old chum, a financial consultant who was as keen as Nick and Vince to blame Gordon Brown and Ed Balls for Britain's debt hangover. My friend also remains an enthusiast for the euro, but there's not much we can do about that. What worries me more is that the banking crowd have shown even less repentance than the shadow chancellor for what went wrong.
Patrick Wintour interviews Balls for Friday's Guardian. He's always interesting, though his insistence on spartan spending discipline remains hard to square with his and GB's expansive record at No 11. Never mind, more important is the continuing fallout from the misconduct of the banks – for which two prime pieces of evidence float to the surface again.
One is what looks like a bold attempt – here's Jill Treanor's report – to restore confidence in the London interbank offered rate, better known as Libor, the amount banks charge each other to lend money, which turns out to have been manipulated for corporate or personal gain during the City's wild west decade. Instead of the system being sponsored by the British Banking Association (BBA), an independent regulator will do the job.
Good. Martin Wheatley, hired from Hong Kong, where he was securities regulator in that very sophisticated market, to head the new Financial Conduct Authority – part of the breakup of Brown's flawed regulatory regime – seems to have adopted a robust approach, as outsiders often find it easier to do.
He was made redundant at the Financial Services Authority (FSA) in 2004 and acquired a tough reputation chasing insider trading in Hong Kong. Now he's back, let's hope he keeps it up. This was a serious failure of cosy BBA governance – not to mention FSA and Bank of England regulation – in the face of concerns being expressed about Libor's probity. Wheatley's report proposes criminal sanctions. Good again.
Far less important in the big numbers end of the business – Libor is at the heart of $300 trillion worth of churning transactions – but more interesting because it affects so many more people directly is the Guardian report (I can't find it elsewhere, even in the banker-bashing Daily Mail) that complaints to banks have grown by nearly two-thirds in the first six months of 2012.
This is nothing to do with investment banking, the Las Vegas side of the business, but is about the way its poor ethical sense seems to have seeped into the retail arm of banking, what used to be the staid and respectable high street bank – its Captain Mainwaring side. As with pensions mis-selling in the deregulated financial services industry since the Thatcherite Big Bang of the mid-80s, pressure to make profits at any cost leads to shortcuts and bad behaviour. The customer suffers.
Yet, seriously successful business leaders – like leaders in most walks of life – know that putting the needs of the customer first is the way to sustain profitability, growth and long-term stability. That's what those boring middle-sized German firms are so good at, boring British ones too.
Lisa Bachelor's Guardian report is pegged to a survey by Which?, the consumer watchdog, which reports that 12,000 complaints a day (or 2.2m between January and June 2012) related to payment protection insurance (PPI), which was widely mis-sold with the result that the courts have ruled that any policy on which it would have been impossible to claim should warrant a refund. Hence the stampede.
For its part, Which? is warning that the £10bn which the big banks – Lloyds, HSBC, RBS and Barclays, all tainted one way or another by the wave of post-bust scandals – have set aside to deal with the problem may not be enough. No wonder they're not keen to lend to small businesses and others needing funds to help keep the economy afloat.
I recently had a minor run-in with Barclays, my own bank since 1963. The details are boring (not to me, of course), but they bounced a savings cheque I'd written on the last day of this financial year because they didn't like the look of my signature. One perfunctory check call was made to my home phone number (we still have one!) – no answer – but none made to the Barclay staffer supposed to look after my affairs who later told me the signature looked fine.
The money which was supposed to move from Barclays to an Isa stayed with Barclays. I suppose every little counts. I got the brush-off and it wasn't a life-and-death issue as it can be for a struggling small business. At least my complaint was heard – I expect they know what I do for a living – and I was told I could take it to the FSA. " I'd rather chop my arm off," I think I replied. The FSA now has 650 staff dealing with PPI claims alone, I'm not going to add to its burdens.
Yet I have a niggling bit of sympathy for the banks here. Why? Because in most black-and-white stories with an obvious villain, someone usually escapes lightly. The media, for example, always lets itself off the hook. That's why ex-Sun editor Kelvin McKenzie is busy demanding an apology from South Yorkshire police for misleading him into printing lies about the Hillsborough dead. They printed it because they wanted to believe it.
In this instance, Lisa Bachelor's report notes that specialist firms – you catch them advertising on cheap daytime TV channels – are whipping up custom (just as they do with accidents at work) by dangling large payouts in front of hard-pressed people, not all of whom are deserving. The banks claim that some such claimants are found never to have banked with them.
Well, they would, wouldn't they? But so would the lawyers and other ambulance chasers who stand to cream handy fees off the top of successful cases of mistreatment. As always, the correction of one of society's abuses – unfair dismissal, pneumoconiosis, arbitrary asylum verdicts, hospital errors – creates an opportunity for all sorts of rascals to pile in behind the deserving to exploit exploitative and careless exploiters, like the banks.
As the financialisation of daily life – here's one explanation (pdf) – creeps relentlessly forward (and more productive forms of economic activity recede in the old industrial west), we will see more such manifestations of desperation and opportunism.
Do you remember in Victorian novels, Dickens is a good example, how some characters were always waiting for a legacy that would put their lives right? Well, nowadays it can be a PPI or personal injury claim. Fine for lawyers, but as the old question goes, "where are the customers' yachts?"