Tuesday, January 19, 2016

The Banking Sharks

An interesting article in the Guardian by Joris Luyendijk author of ‘Sharks: My Journey into the Alarming World of the Bankers’ 

When talking of their bank’s use of loopholes in the tax code to help big corporations and rich families evade taxes, bankers used words such as “tax optimisation” or “tax-efficient structures”. Financial lawyers and regulators who went along with whatever banks propose were called business-friendly, cases of proven fraud or abuse became mis-selling and exploiting inconsistencies between two countries’ regulatory systems or playing them off against each other was regulatory arbitrage. In the City you do not ask if a proposal is right or wrong. You look at whether the plan is profitable and whether it is compliant, ie in accordance with the law.

Banks have vast structures with tens of thousands of staff in departments called risk compliance and internal audit. They have a mind-boggling mountain of rules from regulators, both national, European and global, to contend with. Leaving the inevitable rotten apples and the traders caught up in the Libor and foreign exchange scandals aside, almost all bankers are paranoid about breaking the rules. However, banking staff working in risk and compliance, the legal department and internal audit told me the question is always: how can we game the system within the rules?

The reason so few people went to prison for the 2008 crash is not some global conspiracy. There are extremely worrying forms of political corruption by the big banks, from campaign donations and insane speaker fees for former politicians to the revolving door between regulators, banks and political parties. However, the most important reasons we have seen so few bankers in orange jumpsuits disappear into a jail was that their action were mostly legal. Bankers compartmentalize themselves. The biggest compliment you can get in the City is ‘professional’

Banks weren’t immoral – they were amoral. Bankers want to know if what they did was legal. The terms good and evil simply have no part in the decision-making process. The question is whether something is allowed. It means you do not let emotions get in the way of work, let alone moral beliefs. The problem with the big banks then is not that they are immoral. They are amoral; their employees believe they have only one task and that is to make as much money as possible for shareholders within the law.


Apart from lots of solemn pledges about cultural change, nothing has been done after 2008 about the amoral organising principle of banks. In spite of all the new rules, nothing has changed. It is back to business as usual. And business as usual in finance means on to the next crash.


0 comments: