AFTER weeks of problems in the banking sector making front pages, it’s time we start taking steps to move business back to where it belongs: the business sections of our papers (though that would, of course, be hard in the case of this newspaper). Reputation matters and it’s the driving force behind any good business. And a good reputation is based on trust.
In 1923, the London Stock Exchange received its own coat of arms bearing the motto dictum meum pactum – my word is my bond. The vast majority of workers in the City of London still follow this principle closely. It not only supports ethical behaviour, but it makes very good business sense. Yet although the vast majority of those who work in the City had no involvement in, or even knowledge of, the Libor issue, we cannot dismiss it as a matter of one bad apple spoiling the bunch. The culture and working practices in some financial institutions were not acceptable. Should further such activity be uncovered by investigators, we expect the perpetrators to feel the full force of regulatory action.
This scandal has been damaging to the City and those who work in it, so it is important that we start dealing with the problems at the heart of this issue. We must also make sure that we are seen to be doing so. We must be more active, receptive to change and firm with those who have behaved badly.
The depth and breadth of any problem should not go unacknowledged. This is not just about British banks and the City of London. It is one thing when an individual bank is implicated in a scandal like this, but we are looking at a problem of a whole different order when investigations are taking place into the conduct of over 20 banks worldwide.
Justice needs to be done, and swiftly. The reason for this urgency is because banking on its own – itself just one component of the financial services industry – is a critical part of our economy. A successful financial services sector supports jobs and growth in all parts of the country. Financial services contributed £63bn in annual tax revenues in the year to March 2011.
Contrary to what the industry’s critics might suggest, changes are taking place. Investment and retail banking operations are being partly separated following the Vickers report.
There is certainly a need to review the way Libor is calculated and mechanisms must be put in place, such as living wills, to help ensure that, should banks fail, there would be no cost to the taxpayer.
We must prove ourselves once again worthy of the public’s trust. This means putting the wider public, as well as clients and shareholders, at the heart of practice – upholding the highest standards of ethics.
Mark Boleat is policy chairman at the City of London Corporation.