UBS has been fined nearly £1bn for Libor rate rigging and an ex-city minister says we need a truth and reconciliation process
News that Swiss banking giant UBS has been fined Sfr1.4bn (£944m) for rigging the Libor rate, raises the question: “Has the culture of banking changed since the financial crash?”.
The scale of the attempts to rig the inter-bank lending rate by traders, managers and senior managers at the Swiss bank may make one sceptical in this regard.
The £160m portion of the fine levied by the Financial Services Authority is the largest ever imposed by the City regulator. But UBS is not the only bank to have been caught trying to manipulate the rate at which the major international banks based in London lend money to each other. In June, the FSA imposed a £59.5m fine on Barclays for attempted manipulation of the Libor and Euribor rates.
Speaking on the Today programme, Lord Myners, a former city minister, said:
“We’ve not seen the end of a greed culture in the City. Basically, if you can game the system and get away with it, it’s fine and dandy to do that.”
Myners thinks fines won’t change the culture. The UBS fine was less than 2% of the company’s market value and is tax deductable.
He suggests that we need a truth and reconciliation process in our banks that says “in the past we got the pursuit of profit out of context with trust and behaving in an honourable way”. That, he says, requires a fundamental change in the leadership of the banks and for the banks to be much smaller – and split between retail and investment banking – because they are currently seen as too big to fail.
Tracey McDermott, FSA director of enforcement and financial crime, says that she was aware this year of a “recognition [by the big banks] that the culture needs to change”.
She thinks fines do work because they have a negative impact on the reputation of the banks.
Investigations continue into banks and other financial firms as part of the global probe into rate rigging. Royal Bank of Scotland is in settlement talks over its role.
The UBS fine follows the conviction of rogue trader Kweku Adoboli earlier this year for losing £1.5bn for the bank. It still faces lawsuits in the US for misselling mortgage debt.
So after a plethora of inquiries, investigations and reviews into the banking system by governments and regulators since the financial crash in 2008 and calls for the split between retail and investment banking, how much do you think things have changed, and whay should happen next?