Is it because we is British? Spoof rapper Ali G’s reflex riposte to criticism (“Is it because I is black?”) can be reworked to encapsulate fears among UK bankers that US regulators and legislators have got it in for them. Standard Chartered is the third City-headquartered bank targeted this year. It is in hot water with an obscure New York regulator for allegedly breaching sanctions against Iran. This follows Barclays’ battering for supposed Libor fixing and accusations of money laundering violations against HSBC.
The thesis of many in the City – and some MPs – is that US regulators and politicians have set out to damage the reputation of London’s financial centre with the aim of clawing back business for New York.
The pronouncements of Stateside watchdogs are certainly sometimes inflected with the xenophobia that flourishes in downturns. Gary Gensler of the Commodity Futures Trading Commission has referred to a “London loophole” allowing banks to take excessive risks in the UK. And the key quote provocatively attributed to a StanChart executive by that New York regulator has him raging against “f—cking Americans”.
But elaborate conspiracy theories smack of shooting the messenger. There are two reasons why UK-based banks may be good places for enforcers to seek the scalps needed to justify their funding. First, light-touch regulation in the City before the credit crunch supported a culture of impunity at the margins of UK banking. Second, cosmopolitan banks with colonial legacies may tend to see US regulation as a practical obstacle rather than the moral imperative US regulators would prefer.
The overlay is sheer happenstance. Barclays is a very British whipping boy for widescale Libor manipulation because it opted to settle with regulators before other malefactors. Meanwhile, StanChart’s previously unblemished reputation is roadkill beneath the wheels of a newly formed state enforcer seeking to pre-empt rivals and pull off a PR coup.
The best way for the City to repel US watchdogs is to give them nothing to beef about. That justifies tougher UK regulation since the credit crunch. The business forgone is not worth having.
The old joke about the Co-operative Group was that it wasn’t really a group because none of the staff co-operated with each other. The UK’s biggest mutual now presents a united front thanks to chief executive Peter Marks, who has announced his retirement. Common branding graces food retailing, banking and funerals.
Fissures persist below the surface. An old guard within the co-operative movement, a 19th century socialist riposte to proprietor capitalism, think the Yorkshireman has pushed the group too far in pursuit of profits, up 65 per cent over the past five years. TV documentaries have castigated the tactics used to sell funerals. A Co-op plan to cut wholesale milk prices triggered protests by farmers.
But there are no prizes for being principled but broke. Acquiring Somerfield and 632 branches of Lloyds has given the Co-Op the scale to compete nationally both in supermarkets and banking. That fuels a more nebulous but equally healthy contest: between marginalised mutuality, where customers own the business, and the ubiquitous shareholder-owned Plc. For that, the old guard – grumpy men in pigeon lofts somehow spring to mind – should be grateful.
High time for the chin-stroking savants of Radio Four’s The Moral Maze to focus on payment protection insurance payouts. It is claimed that the compensation from banks is boosting the UK economy more than government growth initiatives.
Was it therefore public-spirited, at a Panglossian level, for UK banks to rip off their customers? The result is that banks have been forced to behave like . . . well, banks. Via compensation, they have typically ended up paying steep interest (the prevailing rate plus 8 per cent) on the “deposits” constituted by PPI premiums.
The cost will fall mostly on unpatriotic skinflints such as Lombard who never bought PPI. We thought turning down superfluous insurance was smart. But it was dumb. We are now funding generous payouts via higher banking charges but receiving none ourselves. In future we will eagerly purchase badly-sold financial products. We will see them as investments.
Admittedly, the stimulatory impact of payouts worth just £4.8bn to date is questionable when annual UK disposable income is almost £1tn. But let us not make life even more trying for the editor of The Moral Maze, a person compelled to deal regularly with Melanie Phillips.