Banking remains rotten to the core

It has become genuinely difficult to imagine the scam that has not been attempted with the consent, and sometimes at the behest, of some fabulously well-rewarded people. Short of hitting the streets to pick actual pockets, British banking has done it all.

PPI, Libor, money laundering, tax avoidance, CCP (credit card "protection"), useless loan insurance, and the alleged attempts to enrich a bank by ruining small businesses: each one garlanded with euphemisms because "crime" is such a harsh word. Then the continuing comedy of bonuses - replaced latterly by vast salaries - as the unearned rewards demanded while the global economy was brought to its knees. Amid it all has come a succession of computer "glitches", as though to symbolise a fundamental failure.

Then there was the financial crash itself, that monument to hubris and incompetence. The politicians, like the central banks, were deceived by a confidence trick based on economic voodoo. They understood nothing of what was going on and didn't much care if cheap credit for voters seemed to be guaranteed. Instead, they told themselves that regulation was out of date and, besides, not really any of their business.

As it turned out, those trading in derivatives and dabbling in sub-prime were also incapable of understanding what they had let loose. History will mark that as the most fascinating truth of what came to pass in 2008: they hadn't a clue. So Royal Bank of Scotland went from being (briefly) the biggest bank in the world to the biggest corporate bankruptcy Britain has seen, and all concerned could muster only stumbling apologies.

Five years have passed since the roof fell in. In the beginning, governments around the world made solemn promises of sweeping reforms. They said it would never happen again; that lessons would be learned. Now and then a rash politician even claimed that the guilty would be punished. In the meantime, the system, the entire edifice, domestic and international, would be restored. We could be sure of that.

From time to time these days some brave or disingenuous politician or executive can still be heard calling for an end to "banker bashing". Barely are the words out before another scandal has erupted. In the last week alone, Lloyds Banking Group has been hit with a record £28 million fine, in essence for bullying staff into mis-selling £2 billion of "products" on pain of demotion or pay cuts. RBS, reliable as ever, has meanwhile accepted a $100m charge for flouting international sanctions.

Five years after the calamity, a banking bill has only just reached its report stage in the Lords. Five years on, a public punished by austerity is running up personal debt to the tune of £1.4 trillion in a country whose economic output barely exceeds that figure. Five years on, George Osborne sits congratulating himself on rising tax receipts when these depend almost entirely on stamp duty from the new housing boom he has engineered. This is not the stuff of wholesale reform. There is a pretence, instead, that somehow the crash didn't happen.

Still the banks remind us that the system was and is rotten to the core. Sanction-busting at RBS might be explained as a historic offence, dating to 2005-8, when Fred Goodwin ran the bank. The point about Lloyds and its determination to grab the public's money is that the worst of the behaviour took place, despite warnings, after the crash and after 32.7% of the group had been taken into public ownership.

If the need for indignation survives, you can start with that. The $100m (£61m) stumped up by RBS to placate American regulators will come, one way or another, from your pocket. "We" still own 81% of the bank. Lloyds, equally, is still underwritten by the public. Both banks are deeply sorry for "failings", but all punishments are eased by the money pumped in on the taxpayer's behalf. In no proper sense of the phrase will either bank pay the price.

The criminal law will also be found wanting, as ever. RBS has terminated four staff contracts. Lloyds is staging a "review" to decide whether customers should be compensated and inviting its remuneration committee to decide whether a few bonuses should be clawed back. This is not condign punishment. These are not the sanctions you would face in any other walk of life. Shareholders (taxpayers included) cough up the fines, a few scapegoats are found, and banking life continues as before.

Even if the political will for reform existed, that kind of absurd leniency is hardly calculated to concentrate the minds of executives tempted by short-term gains. When there is no risk, illegal behaviour is easy. When no-one of importance ever stands in the dock to answer charges, the very idea of illegality becomes meaningless. The law is not different for banking. It simply doesn't apply. That spells more trouble.

Before the Co-operative Bank fell into the hands of US hedge funds after a catastrophic takeover of the Britannia Building Society, hopes of an "ethical alternative" lingered. A "capital shortfall" of £1.5bn and the bizarre tale of the Reverend Paul Flowers, "crystal Methodist" and former chairman, put paid to those. British banking is despised by the public it claims to serve, but there is no real alternative. Credit unions; a few internet initiatives; a Post Office account: that's your lot. The big banks would have it no other way.

In the aftermath of the crash there was a lot of talk, for a brief while, of a "people's bank". There were opportunities: RBS and Northern Rock were in public hands, as were bits of Lloyds; National Savings and the Post Office network were intact and available. Yet neither Labour nor the coalition showed the slightest real interest in creating an alternative to debauched traditional banking.

The scandals go on, yet Osborne is determined to put RBS back into private hands as soon as he can. A people's bank liable to compete with a discredited commercial sector is the last thing his City backers will tolerate. Such a thing would "distort the market" that the banks have been merrily rigging for years. The state's guarantee would be unfair on proven cheats.

What the public wants and needs is of no account. Five years on, outrage simmers away, but nothing of substance is done. A banking sector propped up by the people shows no mercy to those same people - whether individuals or small businesses - in its drive to return to what passes for normal. So the scandals continue, a parable for the times.

The biggest, most obvious lesson of the crash is the one bankers and their friends most want forgotten. Capitalism failed, failed demonstrably, and failed utterly. Those responsible for all those scandals were just fleas on the carcass, but their appetite endures. And they are not even slightly sorry.