Just hours before ten traders were charged with manipulating interest rates last week, Britain's biggest banking lobby group called for one of the country's primary financial regulators to be stripped of its power to fine errant financiers.
At best this poorly-timed plea is tone deaf. At worst it shows a deeper malaise: the industry still hasn't changed since the crisis.
There's a spring in the step of Britain's bank lobbyists these days. After a few years of chastened silence since the financial crisis, they're ready to rejoin battle. They've been helped by a friendly new Conservative government and the departure of Martin Wheatley as head of the Financial Conduct Authority, where he presided over multi-billion pound fines on miscreant banks.
In a long report on industry competitiveness on Friday put together by Hector Sants, who ran the FCA's predecessor, the British Bankers' Association said it would prefer to create a new "independent" body to levy fines instead.
That's a direct attempt to undermine a regulator whose strength comes from being able to whack the finance industry with a big stick when it misbehaves.
It's easy to imagine the industry arguing that any new body would need representation from senior and experienced bankers. Perhaps even from the ranks of the BBA -- the same BBA that failed to supervise Libor properly.
The plea looks self-interested, to put it mildly. Among the report's contributors are:
- Barclays, fined 290 million pounds for rigging Libor
- BNP Paribas, fined almost $9 billion for breaking sanctions on Sudan, Iran and Cuba
- HSBC, which helped Mexican drug dealers launder their money
- Standard Chartered, which in 2012 reached a $667 million settlement over breaches of U.S. sanctions with Iran.
There is a legitimate argument that big fines for bad conduct do little more than penalize shareholders. But the industry needs to make that argument clearly. And it has to accept that if the institutions are fined less, then individuals must face greater criminal accountability.
This sort of lobbying detracts from the more serious problems being dealt with by the industry: regulation is reducing returns and different countries are applying separate rules that favor their own banks. The BBA has a point on this. But it should stick to its basic arguments -- and stay away from conduct.
The industry is still suffering the after-effects of Libor and foreign-exchange manipulation. It's still vulnerable, politically and financially, if another scandal were to emerge. Trying to hobble the FCA may be tempting, but it's wrong.
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