It is important to stress that these accusations are precisely just that – accusations. Standard Chartered emphatically denies them, so I will not prejudge the outcome of this specific investigation. Nevertheless, it is the latest in a series of blows to the banking industry’s reputation.
Some politicians and leading City figures have suggested that recent events may stem from an anti-London agenda on the part of small sections of the rather large US regulatory community. It is certainly true to say that people in London are not familiar with the New York State Department of Financial Services. We’ll be interested to see the basis of what they are saying – in particular whether it is taking an even-handed approach by looking at all banks, not just one.
There is clearly an issue here about whether this regulator’s actions – and the inflammatory language it has used – are appropriate. Something is clearly amiss when an untrailed and unilateral report can lead to a 25 per cent drop in a bank’s share price overnight.
That is not to say that any wrongdoing should not be exposed or punished. But, as Mervyn King pointed out, the behaviour of the New York State Department of Financial Services is very different to that of other regulators involved in this or the Libor investigation.
A coordinated and cautious approach, based on the basic legal premise of innocent until proven guilty, should hold just as true for banks and bankers as other sections of society. Otherwise, there is a danger of such investigations being perceived as motivated by protectionist sentiment on the part of the US authorities.
There are, of course, lessons we can take from the US on how it treats white collar crime. Tougher enforcement is an inevitable outcome of these scandals. The banking sector needs to clean up its house, and be clearly seen to clean up its house.
These investigations date back several years to before the financial crisis. Subsequent regulatory reform by UK authorities has tackled many of the underlying issues. But there is no room for complacency, and the sector must review its practices to ensure that they stand up to the current media and political spotlight.
Financial institutions exist to serve their clients, customers and shareholders. That means taking a long-term approach and ensuring that remuneration and compliance arrangements are in tune with stated values.
Mark Boleat is policy chairman at the City of London Corporation