New banking revelations prove FSA has failed in its basic role

Monday 2 July 2012

The revelations about banks mis-selling financial products which have indirectly ruined hundreds of small businesses and threatened the viability of others is bad enough in its own right ("Scots firms due millions after banks' mis-selling", The Herald, June 30).

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But more significant is the fact the banks themselves must have known the situation they had created and either ignored it or deliberately persisted in profiting from its existence. One wonders whether the same banking principles were applied to inter-bank loans or loans to multinational firms.

The fact the FSA, despite the recent history of dubious practices within the banking sector, appears to have been forced to investigate the situation by external pressure rather than discovering the problem in the course of its regulatory function confirms the FSA fails in its basic role. That the banks themselves did nothing to redress the situation says everything about the ethos behind banking practices and the moral code (or absence of same) in those who direct policy within them.Banks; money; traders; the house of cards of dealing in stocks and shares; trading in futures; it's all an illusion which bears no relationship to reality. There is only a certain amount of work any man can do in a day, a finite amount of actual wealth that can be created. No amount of dealing and no amount of trading in shares can increase this, yet people profit from gambling on this system. Banking has morphed from its original role of being a safe repository for the wealth of individuals into a wealth-creating fantasy world that feeds off the real world where wealth is actually created. This parallel universe is a parasite, allowed to run as it pleases and pay its operatives ludicrous salaries and bonuses as long as it continues to produce profit for a very small sector of society. That its executives and staff can apparently lie and cheat yet never end up on a criminal charge demonstrates where power actually lies. The real reason why banking is poorly regulated can be found by identifying those who gain from the current situation. In life, when someone wins, someone else has to lose. In banking, millions have to lose so that a few gain millions. David J Crawford,131 Shuna Street,Glasgow.Fining the banks for rigging the Libor interest rate may be necessary, but it isn't a sufficient response to the latest scandal. Those who engaged in misconduct must be held accountable for their actions. The guilty parties should lose their jobs and be sued for recovery of the bonuses they were paid under false pretences; and the most serious offenders should face criminal charges. Among those serious offenders are the senior managers who either knew or should have known what was going on. It's tempting for managers not to ask questions when results are good and employees are meeting targets. But, given the scale of the malpractice and the openness with which it was discussed in emails, there must have been rumours going around the banks about something fishy going on. Those should have been investigated. Instead, it looks as if senior managers didn't know because they didn't want to know.Let's not forget that the vast majority of bank employees are decent, honest and hard-working. They must be even angrier than the rest of us, when they discover that colleagues have received vast bonuses and promotion on the basis of fraud. We're forever being told that employees in financial services need the carrot of big bonuses as an incentive; for the sake of most of the employees as much as ourselves, we also need the state to wield the big stick of criminal charges to ensure probity.We need strong banks and we need fair banks, but most of all we need honest banks.Doug Maughan,52 Menteith View,Dunblane.There's been a lot in the papers recently concerning the anguish of our banking industry. Let's remember one thing: banking is not industry. Industry buys material, makes it into something else and sells it for profit. It adds value.Banks do not make money. They produce precisely zero. They add zero value.What they do is skim a percentage off those who actually work.Let's not confuse banks with industry. They couldn't be further apart.Simon Wallwork,East Morningside,Main Road,Langbank,Renfrewshire.The banks and their disdain of any notion of morality are not the real problem in society today. There is a profound and rotten core to what one might call the establishment. The banks are merely the most obvious sympton. The actions of those who have run these institutions have taken the western world into the worst financial state in living memory. It is so bad that the governor of the Bank of England, Sir Mervyn King, has attacked the rotten culture within the City in a manner quite unthinkable several years ago.Yet this begs the question: where was Sir Mervyn's voice in the years when the gamblers were hard at work in the great saloon of the world? One might also ask what was the FSA doing; and what were the politicians and the Treasury doing?Politicians of all parties are to blame, chumming up to the City and conniving with their pleas for minimal regulation. Along with this we have seen the worst excesses of journalism in the Murdoch empire incorporating the politicians and police. The Leveson enquiry will no doubt produce what all such enquiries produce; a lot of hot air and little of consequence.The people of these islands are not just fed up; they are becoming increasingly angry. There is an I'm-alright-Jack attitude among some who still do well out of the system. They should remember that when the base of the pyramid collapses, the pinnacle goes down with it too.Roger Graham,23 Cullen Crescent,Inverkip.

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New banking revelations prove FSA has failed in its basic role

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