If a week is a long time in politics, how long is 18 months in banking?
Bob Diamond began his abbreviated tenure as CEO at Barclays in early 2011 by telling the Treasury select committee that "there was a period of remorse and apology for banks and I think that period needs to be over".
Yesterday, Stephen Hester, chief executive of Royal Bank Of Scotland (RBS) admitted that the reputation of the industry was at "new lows". Indeed, rock bottom may still be some way off, for, as he observed: "There is still a risk you turn over rocks and find new things."
Indeed, the bank that has been bailed out by taxpayers with subsidies and guarantees has been caught up in one scandal after another, revealing a high-handed attitude to its customers.
Though the focus of the Libor scandal (involving the manipulation of inter-bank lending rates) has been on Barclays, Mr Hester revealed yesterday that RBS has sacked four employees involved in the same practice. Also, the bank has been obliged to put aside a further £135 million to cover the cost of mis-selling payment protection insurance, bringing the total bill to £1.3 billion. Another £50m will go to compensating small businesses that were mis-sold complex insurance products that have brought many to the brink of bankruptcy.
To add insult to injury, a computer glitch in June left many of their customers unable to secure access to their own money, a blunder that is likely to cost them a further £125m.
Meanwhile, half-year losses have doubled to £1.5bn at the state-backed bank that still owes the Treasury £28bn.
An understandable response to these recent scandals has been a call for heads to roll. While public anger might be assuaged by the sight of a few overpaid banking executives behind bars and news of heavy fines for their various iniquities, that will do little to change the predatory culture that has taken root in the industry.
In fairness to Mr Hester, who was parachuted into RBS to clear up the mess after the departure of Fred Goodwin, he has done a reasonable job under the circumstances. He also recognises that the industry has become detached from its customers and needs to reinvent itself. Credit is due also to hard-working, modestly-paid RBS staff, who are as much victims of this debacle as their customers. Indeed, as many of them had been encouraged to invest in employee share option schemes, the fate of this once-great Scottish institution is a double whammy for them.
What to do? Despite recent talk of fully nationalising RBS, there is little appetite for a move that would land taxpayers with even more of the bank's toxic debt. Campaigners, such as Move Your Money UK, urge customers to switch their accounts from RBS to ethical alternatives such as credit unions and other mutuals. There is a logic in such action, though it is unlikely that sufficient numbers will act to force a fundamental rethink in the industry. Yet cultural change is what is required.
Two of the UK's big four big banks – Lloyds and Barclays – were founded by Quakers on the principles of social justice, integrity and thrift. That was the character of the entire industry until the "big bang" brought together retail and investment banking. Since then politicians of all stripes have looked the other way while greedy bankers did what they could get away with, regardless of their customers' interests.
That is why the Coalition must ignore special pleading to water down the recommendations of the Vickers Report to ring-fence investment activity, encourage the creation of new competitors in retail banking and facilitate switching accounts between banks. If the banking industry is incapable of reinstalling its moral compass, it will be in no position to complain if customers vote with their feet.
We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis. If you're a relatively new user then your comments will be reviewed before publication and if we know you well then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules, which are available here.
Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.