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Dublin: 14 °C Thursday 23 October, 2014

Column: Make an example of bankers. Just do it.

Former trader Nick Leeson says an example was quite rightly made of him when his actions led to the collapse of Barings Bank – why isn’t that happening now?

Nick Leeson

THE RATE-RIGGING scandal at Barclays Bank has propelled the murky world of Finance back into the headlines. Public opinion in the United Kingdom is very strong with demands that something needs to be done.

This is not just an English problem but extends further. The culture at banks has once more been called into question. I have been asked if the culture has been improving: a cursory glance at the events of the last seventeen years suggests the opposite.

One commentator suggested that we should be able to rely on the fact that people should behave morally and ethically. In an ideal world maybe but none of us live there. There will always be a rogue element in society that will break laws. Banking is no different and adequate deterrent is required. Right now we are lacking a believable deterrent and whilst that situation remains there is no chance that culture or behaviour will improve.

My escapade at Barings starting twenty years ago and ended a full seventeen years ago. It was described as a defining moment, the time when things would start to change in banking. It did for a while but it didn’t take long for people to forget. Regulators were given new powers, new laws
and standards of behaviour were introduced and legislation was written, but the quality of control remained the same; poor.

“No, it’s not okay!”

Neither did the rhetoric that we hear from senior banking officials change much, their explanations were largely identical. The scandal involved a small number of people, they are no longer employed, the situation has been corrected, it won’t happen again and we need to return to the serious business of restoring reputation and confidence. Okay?

No, it’s not okay! We are fed up of being told that everything is okay and it clearly isn’t.

We need a truly defining moment. Without one there will be no change in behaviour and the culture will continue to trawl the depths of moral and ethical appropriateness. The opportunity has to be taken now to put manners on the banking community. All action has consequence and there has to be adequate deterrent for those who are willing to cross the line between right and wrong. That is true in London, Dublin, New York or anywhere in the world. We lack adequate deterrent in the world of Finance and that is not acceptable.

I quite rightly went to jail for my actions in Singapore and I really have no desire to see jails full of bankers as it is definitely the smallest minority that transgress but a serious message has to be sent. Rate-rigging and manipulation are as serious as it gets. Bob Diamond himself has described those involved actions as abhorrent: he is correct. But let’s not forget that this is the same person who was suggesting a few months ago that it was time for bankers to stop apologising.

The punishment has to fit the crime. In this instance if the punishment does not make people in the City of London sit up and take notice, it will be as meaningless as the £290m fine that has been handed down to Barclays Bank.

Not unlike what we have experienced in Ireland over the last few years, we are told that criminal prosecution may be difficult. I still find that particular pill very difficult to swallow. Rate-rigging and manipulation are very strong words; everyone will accept that they are wrong. The motivation, we are told, was to present a better picture of the bank’s performance and at different times to book profits for these traders.

“Distinct apathy”

There’s very little difference in the way that financial positions were manipulated at the height of the banking scandal in Ireland. I’ve made it very clear in previous articles that there is a distinct apathy when it comes to pursuing white collar crime. There is disagreement in the UK as to who should lead the inquiry into the events at Barclays, whether the investigation should be judicial or government-led.

Much like the tribunals that have recently finished here in Ireland, I don’t think that either will have much real lasting effect. We are nearly a full four years since the onset of the financial crisis, investigations continue into Anglo and others but little is being done. It really is not acceptable.

The culture within banks is so poor for one reason and one reason only; they have complete contempt for the rules and those in place to enforce them. Unless this changes, we will revisit this type of episode time after time. Rules and Regulations are little use unless they are effective and unless there is adequate and meaningful deterrent, they will never be effective.

The only way to have adequate deterrent is to make example of those that break the rules.

Read: Mick Wallace and his false economy>

Read other previous columns by Nick Leeson>

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