The news of rate-fixing at Barclays comes at a time when financial regulation is being debated in parliament. Ultimately this scandal highlights that four years on from the financial crisis, nothing’s changed.
Culture at the banks is no better and practices that damage trust and confidence in the system continue.
Public discussions about this scandal have largely centred on the accountability of Barclays’ senior executives. And now that its CEO Bob Diamond has resigned, there’s no doubt that this debate will continue.
How has rate-fixing affected you and me?
What seems to be largely missing from most discussions is any concern about what this latest scandal means for consumers. That is, how has the fixing of a rate we rarely hear about actually impacted savers and borrowers?
As no one seems to know, we’ve written to Martin Wheatley, the incoming head of the new financial regulator, to ask for an investigation into whether retail customers have lost out as a result of the manipulation of the Libor rate. If people have, then the banks must be required to immediately compensate consumers without the need for them to make individual claims.
‘What good is another investigation? The banks will just do it again,’ I hear some of you cry. As we discussed yesterday, our survey showed that people continue to have low confidence in the government to handle the banking crisis effectively.
The government must not delay banking reform
People are right to be pessimistic, but George Osborne’s announcement yesterday has given me a few reasons to be hopeful.
Firstly, he announced that the government is going to amend the Financial Services Bill to allow the revenue from fines to go to ‘the benefit of the public’ rather than the benefit of authorised persons’. At Which? we have long called for this change. It is perverse that all FSA fines, like the £59.5m from Barclays, are recycled back into the pockets of the industry through lower fees to the regulator the following year.
And secondly, George Osborne has asked for a review of the current civil and criminal sanctioning powers, with respect to financial misconduct and market abuse. This could mean that in the future those in charge at the banks during these big scandals will face the full wrath of UK law.
And although we want a full inquiry into the rates-fixing and how consumers have been affected, we don’t want this to hold up reform – there must be no excuses, no further delay in taking action to fix our broken banking system. The question is, will the government fast-track the urgent banking reforms we need?