/ Money

No more excuses and no more delays – fix broken banking

Broken piggy bank

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?


These dodgy deals are being motivated by big payouts to the lucky few who manage to get away with it for long enough to trouser the cash they have “earned”.

A possible answer is to place a large percentage of commissions and bonuses due into an escrow account. The money, plus accrued interest, will only be released in say, seven years’ time. This period is sufficient for the bank’s accounts to have been audited and signed off, miss-selling to have surfaced and at least some illegal transactions to become apparent. Obviously, if any of these circumstances arise, these escrow accounts are forfeited to help pay compensation and fines.

Even if few frauds are detected in practice, it should still have the effect of cleaning up the industry. Who is going to risk time on an immoral scheme that could see their ill-gotten gains snatched away, when there are still plenty of legal ways to help themselves to someone else’s assets? And which banker is going to sanction a scheme that might compromise the release of “their” money in the corporate escrow account?

If fact, the only problem I foresee with implementing this idea is: where are the banks going to find someone they can trust to look after their money for seven years without losing it all? Another reason for them to get their own house in order.

I meant “… mis-selling …”, of course.

frances says:
3 July 2012

Consumers will certainly be impacted if Mr Osborne
allows Interest Rate Swaps on the High Street.
What is the purpose of the Ring Fence ?

The government cannot change anything as they are effectively “owned” by the banks in the same way that football clubs are. Everton springs to mind.

The debates we have about whose fault it is, who should pay and what regulation must be introduced is largely irrelevant. You only have to see the behaviour of Mr Diamond to realise that people of his financial stature do not care one jot and so he subsequently blames it on the politicians.

Sure, that’s what politicians are there for, but there is no remorse, no apology, no guilt, and most of all, no criminal proceedings. As Nathaniel Rothschild once put it:

“I care not what puppet is placed on the throne of England to rule the Empire, …
The man that controls Britain’s money supply controls the British Empire.
And I control the money supply.”

Sorry if a bit political, but this subject will always be political. I just don’t think that we, as a nation, will ever get the banking reforms that we “need” due to corruption in the system that we so blindly believe in. Any more “regulation” will make it more complicated, thus open to abuse.

It depends entirely if this “government” feels it’s neck is on the line – I have no faith in this particular “government” – never had faith in banks – as I have known since my very first bank account that they are NOT a service but a money grubbing business,

We need stricter regulation and inspection – but that regulation must be written in plain English so it is understood without ambiguity. With this government we won’t get it unless we have a judge led inquiry. We need the banks to be a service for the good of the country – not for the greed of the bankers.

frances says:
5 July 2012

It’s hard to see how we could reform the Banking System
without reforming the Money System upon which it is based.

Right now all our money is created as debt. No debt, no money.
This could work if there was no interest to be paid.
But it’s obvious that the first debt (principal + interest) cannot be paid off
without more debt (money) being created – simply to pay the interest.
The second debt cannot be paid off without more money (debt) being incurred ……..
And so on.

All of this debt money is chasing the interest (compound) piling up on it.
And it’s never going to catch up.

A bit like a dog running round after it’s tail.
Except that the distance between the tail and the nose
is getting longer and longer.

To add insult to injury, it also means that the economy has to grow and grow
at an ever faster rate. More and more people have to work longer and longer.

This situation is not only rediculous.
It is unsustainable and destructive.

If you would like a much better take on all of this,
please read :-

“The End of Growth” by Richard Heinberg.

Michael Hodder says:
5 July 2012

If one takes a loan out on all most anything else other than a mortgage one agrees at the time of signing the agreement how much the monthly repayments will be however with a mortgage the banks/building societies can alter the interest rate at anytime why? The mortgage repayments should stay the same for the duration of the mortgage. We now know that the interest rates have been tampered with and we Jo public have been mislead by so-called tracker and fixed rate deals that have been no more than a smoke screen.. I also feel that employees should have the right to have their wages paid into their banks weekly if they wish, the reason payday loans have come about is because if one has a sudden expenditure mid-month it can be very difficult to make ends meet to the end of the month, a return to weekly pay would be very popular and give family’s much better cash flow.

It’s interesting to see that ethical-focused provider Triodos Bank has seen a 51% increase in online savings account applications over the last week. Also, three times as many UK accounts as usual were opened with the bank on Monday 2 July. This must surely be a direct result of the Barclays scandal and I’d expect similar boosts to be seen with credit unions, friendly societies and smaller providers like building societies, Charity Bank and the Co-op.

If you’re interested in ethical investments, we’ve got a guide: http://www.which.co.uk/money/savings-and-investments/guides/ethical-investments/

And if you’re tempted to switch bank or savings account, we’ve got guides for that too: http://www.which.co.uk/money/bank-accounts/guides/switching-your-bank-account/ http://www.which.co.uk/money/savings-and-investments/guides/finding-the-best-savings-account/switching-your-savings-account/