J’accuse the Mafia banking sector of wholesale criminality

Standard and Poor’s report that 2015 will be worst in history for bank fines for outright criminality!

According to a report by Standard & Poor’s, Royal Bank of Scotland, Lloyds, HSBC and Barclays will pay more in fines for mis-selling (institutionalised fraud) and market manipulation in 2015 than in any year to date. 

S&P predicts that the big four’s bill for misconduct fines and compensation for PPI and interest rate product mis-selling will hit almost £14bn this year. 

RBS, HSBC and Barclays are still expecting to be hit with fines for foreign exchange manipulation this year, while RBS is due to receive a multi-billion pound fine for mis-selling mortgage-backed securities. 

S&P believes that this will be the biggest year yet for litigation fines, meaning a record combined pay-out from RBS, Barclays, HSBC and Lloyds. The four banks have borne £42bn in conduct and litigation charges in the last five years, but can expect £19bn more in the next two, according to S&P.

Yesterday’s Daily Telegraph Business section ran a shocking story that not only confirmed these figures, but also set out the statistics for financial criminality in all the British banks for the past 5 years.

In it he notes that S&P now believe that bank fines are now a ‘way of life’.

The statistics for these fines and the crimes they represent make for sorry reading, and the list below identifies the worst offenders and the crimes they committed.

Before reading, reflect, all these offences were admitted from the start – the banks effectively pleaded guilty to these crimes without any contested trials. This is a level of criminality which is so vast and so damaging that I believe the next Government needs to seek a Royal Commission to enquire into this level of blatant thieving.

If crime of this level of seriousness was being admitted in any other business of public sector industry, the Government would be calling for major anti-crime initiatives, police task forces would be deployed, and heads would be rolling across the sector, and people would be going to prison.

1. UBS: £233,814,000 (FX rate fixing)

This huge, nearly a quarter of a billion pound-fine is actually a 30 per cent discount because all the five banks involved in the forex scandal pleaded guilty early in the investigative process. Combined with its fine from US financial regulator the Commodity Futures Trading Commission (CTFC), its total fines were a massive £503m. 

2. Citibank: £225,575,000 (FX rate fixing)

Much like UBS and the other banks involved in the forex rate-fixing scandal, Citibank rolled over early in the case. It was also received a £194.6m fine from the CFTC.

3. J.P MorganChase: £222,166,000 (FX rate fixing)

This bank has featured almost every year for the past five years. However, this is the largest fine the bank has ever received, with combined total fines of £417m over the scandal, including £195m from the CFTC.

4.RBS: £217,000,000 (FX rate fixing)

RBS total fines over the forex rate fixing scandal were £399m including £182m by the CFTC.

5. HSBC: £216,363,000 (FX rate fixing)

HSBC has confirmed it has set aside $378m (£249m) aside for fines - although combined with penalties from the US regulator, HSBC’s total over the rate fixing scandal hit £389m.

6. Lloyds and Bank of Scotland: £105,000,000 (Libor)

2014’s other major financial scandal was Libor, where several banks (Lloyds among them) colluded to fix the London Interbank Offered Rate (Libor) - the rate at which banks lend to each other. 

7. RBS, Natwest and Ulster Bank: £42,000,000 (Failing to provide adequate IT systems)

8. Barclays.  £37,745,000 (failing to properly protect £16bn of clients’ custody assets)

Barclays isn't the only bank to feature twice on this list- but it does so while also being investigated for both the Libor and forex - more fines are expected to follow. The bank was fined by the FCA in September when it failed to protect funds a client had entrusted to them in custody. 

9. HomeServe: £30,647,400 (mis-sold insurance policies)

The only non-bank to make the top 10 this year HomeServe, which was slapped with a massive £30m fine after it was found it had not only mis-sold insurance to its clients, but also failed to investigate claims in a timely manner. 

10. Barclays: £26,033,500 (failing to manage conflict of interests) 

What these figures demonstrate is an era of Organised Crime on a hitherto unimaginable scale. It is clear that these banks, in order to maintain the level of revenues they required to support their over-inflated share prices, had to engage in wholesale criminality to make their numbers.

How is it that no-one has gone to prison for these crimes. How is it that bank senior executives have not been called to account?

Every time we see a Parliamentary Committee sitting in judgement on these creatures, we see them slipping, sliding, evading the questions, sometimes being economical with the truth, sometimes downright lying, but never any question of anyone being required to resign.

While these statistics reflect an unacceptable level of organised crime within these banks, they also reflect an almost complete absence of any kind of pro-active activity on the part of the regulators.

The role of all law enforcement agencies, (and financial regulators do perform a policing function, no matter how much they may deny it and seek to wriggle out of their responsibilities for ‘policing’ the market), is to prevent crime in their market, industry or social sector.

Crime prevention is a pro-active science, where those charged with the duties of regulating the market should be adopting integrated and pro-active techniques and strategies to identify and disrupt such activities in the market, in the first place.

Waiting until the horse has bolted and the cat is out of the bag (how I do love a mixed metaphor), is futile. It means that the regulators are always responding after the event, and always too little, too late!

These latest statistics must be a clarion call to Government, because these fines are being loaded on to the shoulders of the shareholders, and they are not impacting on the most egregious criminals themselves, the banks and their management.

We simply cannot go on watching this pantomime being played out, where fines, the size of which would pay to support the NHS for years to come, are being levied against criminal enterprises who show no signs of conforming to law.

As a matter of course, any bank director whose institution is fined sums of this magnitude should be facing the wrath of the English Courts as well as the demands o out-of-pocket shareholders.

The SFO and the City of London Police should be harmonizing their approaches to these criminal allegations, and should be working out a list of those they would wish to interview.

In no other walk of life would such dishonest and egregious business practices be tolerated.

This must now become a priority for Government – It already is an electoral issue for me!

HSBC threatens to relocate its business centre to avoid regulatory requirements.

HSBC has threatened to relocate its headquarters outside the UK, in a move promoted by the Chairman, Douglas Flint, in response to "regulatory and structural reforms", including the requirement for banks to separate their investment arm from the retail divisions, which was instituted after the 2008 financial crash.

The bank has also been hit by the UK bank levy, which last year cost it 1.1 billion US dollars (£730 million), up 200 million US dollars (£130 million) in 2013. Flint's announcement sparked a claim that the "regulatory pendulum has swung too far".

Flint disclosed the review at the company's AGM in London, where the board faced a torrid time from angry shareholders over the potential move. They were also castigated for a series of financial scandals that have engulfed the bank, marking it out as one of the most egregious financial mafias operating out of the UK.

One investor, Michael Mason-Mahon, said: "Which country are you likely to go to? How many countries have you not committed illegal and criminal behaviour in?"

These are, rightly, very difficult times for HSBC, and its aggressive and pompous response to legitimate international concerns at its concerted organised criminal behaviour, does not indicate that they have learned any lessons from their wrong-doing.

OK, so the chairman of HSBC has admitted his shame at the “horrible reputational damage” the bank has suffered following the revelations of the systematic aiding of tax avoidance at its Swiss subsidiary, but he has refused to take personal responsibility for the failings.

I mean, he was only a very senior director of this major bank at the time, but this still doesn’t mean that he feels he should accept any responsibility.

Douglas Flint, who was finance director at the time HSBC took over the Swiss subsidiary, infuriated members of the Treasury select committee by blaming the failings at the Swiss unit on local managers and said that the secrecy surrounding banking in the country made it difficult for him to have a direct line of sight of what has happening at the bank.

If that was the case, why did he not demand access to the information and require it to be shown to him, if he felt he was in charge of business conduct he could not properly identify?

Flint, who has been chairman of the bank since the end of 2010, said: “I believe in personal accountability and I do believe people should be held responsible for what they have direct oversight over when they have failed”.

OK, fine, all well and good, but how does he avoid the allegation that the overwhelming reason he did not ask to see the evidence identified was because he did not want to see it for fear it would implicate him in unacceptable activities which he would then have had to disclose to British financial regulators and law enforcement agencies?

While he said he felt “very ashamed” of events at the bank, he said he would not forfeit past bonus payments in response, telling MPs: “I don’t feel that proximate to what was happening in the private bank.”

Hmmmm, interesting weasel word that ‘proximate’. He should have known what was going on, he should have engineered greater proximity, how else could he have exercised his duties and responsibilities as a senior director?

And what about his noble Lordship, Lord ‘See No Evil, Hear No Evil’ Green, an ordained Tory minister, who has repeatedly refused to answer questions in public about the scandal – citing a “point of principle”. 

Flint added: “Most accountable, I think, are the management in Switzerland. It’s very difficult for people outside Switzerland to get any access to the detailed account-level information in Switzerland. That’s something only the management on the ground can have access to for all the privacy and secrecy reasons...”

With very little respect, that is not good enough!  As Chairman, you are bloody well entitled to know, you ought to know and you should have demanded to know. Not asking taints you and your actions deeply, you are complicit sir,!

Having bamboozled the Parliamentary Select Committee, and not being likely to face any kind of investigation from the FCA, it would seem that HSBC Board members may feel that they have avoided the worst kind of allegation which would under most other circumstances have caused resignations.

Directors of the kidney of HSBC men do not rise to their exalted heights by readily admitting their culpability!

So, instead of adopting a more humbled stance and expressing contrition at the way in which they and their senior executives have behaved in recent years, they have behaved like a spoilt child, thrown an enormous hissy-fit, and started to threaten to relocate their non-retail business to a jurisdiction where they won’t have to comply with a series of regulations designed to make their risky business activities, less likely to bring the entire financial house down, in the event of an adverse market reaction. 

What this demonstrates is that the basic commercial culture of HSBC is designed to avoid as many prudential regulatory requirements as possible, because, presumably, they get in the way of the bank’s ability to make money, quickly, easily and without too many awkward questions being asked!

The reason we have bank regulations is to keep the banks honest, or as honest as it is possible to get. The aim is to ensure that they do not have a sudden rush of blood to the head and run out and stick the entire Treasury reserve on red at the casino in Monte Carlo, or short every trade on the New York Stock Exchange Big Board in an attempt to undermine the market.

Most banks know this, and despite having spent a lot of money with their lawyers and PR advisers trying to oppose these regulatory changes, they will grudgingly fall in line in time.

Not so HSBC it seems.

Well, frankly, if HSBC wants to relocate its HQ to some Asian centre, good luck to them and good riddance.

The reason why I suspect the move is going to be very difficult to achieve is because I seriously doubt that many of the senior executives’ wives will be very happy about relocating to Hong Kong for the foreseeable future, and live under the benign control of the PRC.

Can you imagine what it will be like for these gilded and privileged individuals to be forced to move out of their Notting Hill enclaves and take up residence in some crowded Hong Kong high rise apartment? I mean there is a limit to the amount of Sushi and lemon chicken one can consume!

By setting this rabbit running, HSBC have made a strong public statement that they have no interest in doing business in a regulated business environment and are about to engage in an exercise in regulatory arbitrage.

They, like other banks, are beginning to discover that they cannot make the same level of profit working in a firmly regulated financial arena, so they must look around for a less-regulated environment, where they can engage in their anomic conduct to their heart’s content.

The air will be a lot sweeter without them!