Wednesday, April 29, 2015

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!

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