Why we face a bloody revolution on the streets in 2013 !

On the evening of Thursday 4th April, I was privileged to address an audience at the Friends' Meeting House in Manchester. The topic of my presentation, for which I have to thank Phil Duval, both for the invitation and the theme, was '...How the banks are stealing your children's future...'

I didn't realise it before I got to the venue, but it stands literally a stone's throw away from the site of the Peterloo Massacre, (or the Battle of Peterloo) which occurred at St Peter's Field, Manchester on 16 August 1819, when local mounted yeomanry charged into a crowd of 60,000–80,000 people, gathered to demand the reform of parliamentary representation and electoral enfranchisement.. 

The soldiers were local territorial volunteers, not regular army cavalrymen, and the local Yeomanry were given the 'privilege' of arresting the speakers. They were led by Captain Hugh Birley, (Birley owned a large textile factory in Oxford Road, Manchester. He had developed a reputation as an arrogant industrialist with highly reactionary political opinions);  and Major Thomas Trafford, (Sir Thomas Joseph de Trafford, 1st Baronet) and were essentially a paramilitary force drawn from the ranks of the local mill and shop owners, coupled with the local landed elites, who had active interests in suppressing popular local reform demands, despite the great distress of the ordinary working people in their community. 

The end of the Napoleonic Wars in 1815 had resulted in periods of great famine and chronic unemployment, exacerbated by the introduction of the first of the Corn Laws, legislation which  had been introduced to ensure that British landowners reaped all the financial profits from farming. The corn laws (which imposed steep import duties on cheaper foreign grain) made it too expensive for anyone to import grain from other countries, and thus maintained food prices at an artificially high level, even when the people of Great Britain and Ireland were literally starving, and needed the food.

Then, as now, the rich elites ensured their own hegemony at the expense of the poor and the working class, in a similar way to which the Tory-voting banksters today manipulate the financial markets through criminal activity and steal vast sums from their clients, while paying themselves vast salaries and obscene bonuses. At the same time, George Osborne and Iain Duncan-Smith cut working people's benefits, blaming the poor and those on benefits for the desperate financial situation the country faces, and set working class people in conflict against each other, while routinely ignoring the crimes of the rich and powerful.

 By the beginning of 1819 the pressure generated by poor economic conditions, coupled with the lack of suffrage in Northern England, had enhanced the appeal of political radicalism, and In response, the Manchester Patriotic Union, a group agitating for parliamentary reform, organised a demonstration to be addressed by the well-known radical orator Henry Hunt..

Shortly after the meeting began, local magistrates called on the military authorities to arrest Hunt, and to disperse the crowd. The Yeomanry charged into the crowd with sabres drawn, and in the ensuing confusion, 15 people were killed and 400–700 were injured. The massacre was given the name Peterloo in ironic comparison to the Battle of Waterloo, which had taken place four years earlier.

I was fascinated to have the privilege to address an informed local audience in such a setting, and I felt a strong sense of historical synergy as I talked about the crimes of the powerful today and the way they were impacting on the financial interests of ordinary people and how the crimes committed by the banksters would leave a legacy which our children and indeed our grandchildren would still be paying for in years to come. 

The day had started well with the news that the three main protagonists in the HBOS collapse had been impugned in a scathing report by the Parliamentary Banking Commission which had said that  "toxic" misjudgements led to the bank's downfall and the need for a £20.5bn bailout by the taxpayer at the height of the financial crisis.

The report concluded: "The primary responsibility for the downfall of HBOS should rest with Sir James Crosby, architect of the strategy that set the course for disaster, with Andy Hornby, who proved unable or unwilling to change course, and Lord Stevenson, who presided over the bank's board from its birth to its death."

There can be no escaping from  the realisation that the UK is in terrible financial trouble. Putting it at its simplest, the main High Street banks are to all intents and purposes, frankly bankrupt, and Government is vainly seeking to enforce higher levels of capital adequacy in order to give them sufficient capital in depth in order to be able to withstand another (the next) major financial crisis.

How we got into this desperate situation is an appalling story of arrogance, hubris, bullying and incompetence, a toxic mal-administration of both the banking sector, and its functions. It was orchestrated by a group of men, Bob Diamond, Fred Goodwin, James Crosby, among many others, men who had reached levels of power from which it was virtually impossible to unseat them, and whose arrogance was blinding them to the reality of their actions.

By overseeing a campaign of institutionalised financial crime (PPI fraud, LIBOR manipulation, as well as other offences of downright criminality such as drug money laundering), and coupled with a campaign of debt-creation on a scale unimaginable only a few years ago, these men oversaw institutions in which all the ordinary rules of prudent commercial engagement were thrown to the wolves and trampled underfoot.

A report into Barclays bank has blamed "cultural shortcomings" at the bank for problems that led to the Libor-rigging scandal last year. The report said there was a sense that senior management did not want to hear bad news. As a result, the bank had become too focused on profit and bonuses rather than the interests of customers. Barclays' rapid expansion in the years leading up to the financial crisis produced "cultural challenges" at the bank. "The result of this growth was that Barclays became too complex to manage, tending to develop silos with different values and cultures," it said.

The bank became increasingly dominated by the investment banking business, which possessed a strong culture of winning. This meant there was an "over-emphasis" on short-term financial performance, reinforced by a bonus and pay culture that rewarded money-making over serving the interests of customers and clients. 

In these few short paragraphs, the poisonous cocktail of mismanagement practices are laid bare; an over-emphasis on short-term profits, resulting in vast bonuses being paid to a small group of elites; the over-complexity of structure, leading to a focus on micro-management of specific profit centres, to the detriment of the wider institution, benefiting a small group of elites again; and finally the over-emphasis on investment banking (or casino banking, identified by gambling with other people's money), yet again, benefiting a small group of elites.

Reading between the lines, Barclays Bank, and indeed many other banks within the UK financial construct, had become the private playthings of a small group of spivs and chancers who were willing to put the rest of the banking structure at risk, all the time they were making vast profits and bonuses for themselves. 

They were happily undermining the entire underlying banking structure on which UK plc depended for its future development and the continued maintenance of its complex democracy and social infrastructure, for their own personal benefit and gain. They were mortgaging the future of the entire British community by engineering fictitious money out of thin air, secured on the deposits of their customers, to be spread around in highly risky securitised lending to every Tom, Dick and Harriet who knew enough to be able to find their way to a bank.

As they wrote and re-wrote loans running into billions of pounds, they spread the risk around to other risk takers - who took the chance to sell the risk on to third and fourth party risk takers, who in turn played the zero sum game by balancing their exposures to risk by hastily structured credit default swaps. It didn't seem to matter how many times you turned the money-making handle, the profits poured out, the salesmen's commissions flowed and the banks made more and more money.

The City entered into a Faustian pact with the Labour Government of Blair and Gordon Brown, who, bedazzled by the profits being declared and the taxes being paid on these vast fortunes, (Brown never once stopped to consider that these banks were only declaring a very small percentage of their vast profits for tax purposes) the rest was being quietly stashed away in off-shore branches of their institutions and moved on to other tax shelters. That is why Barclays and other banks provided departments that focused on tax-restructuring (or evasion on a massive scale). 

All the time Brown was believing the falsified figures, he could be prevailed upon to soft-pedal on the compliance brake, and insist that the regulators cut the boys in the banks some slack, while they were making all this money.

His Mansion House speech in 2002 is a masterpiece of hubris, the words of a man who had been taken for the biggest idiot in Christendom, and was the living proof of the greater fool theory.

The full text of the chancellor's speech at the Mansion House, London, June 26 2002 can be read here; http://www.guardian.co.uk/politics/2002/jun/27/economy.uk - read it and weep! Here's a taste;

"...And, as you, Lord Mayor, have indicated this evening, the importance that the city attaches to integrity and the highest standards in the provision of financial services is the enduring means by which London's reputation as one of the world's leading financial centres is secured, and indeed enhanced..."  

Yeah, yeah, yeah, Yada, yada, yada, whatever!

And this nonsense is still openly subscribed to by politicians and citizens alike, so much so that the banking sector feels capable of holding the country to ransom with the threat that if they are brought to heel, they will simply leave and go elsewhere. The fact is they won't, but no-one seems willing to call their bluff. They believed it so much they poured tax-payers' money into shoring up the whole rotting edifice, and there is no doubt the banksters will need more recourse to tax-payer's funding before too long.

And thereby the seeds of the next harvest of damaging civil unrest are sown!

None of our political parties have the balls or the guts to take on the banks, because they still labour under the same misapprehension that banks aren't really organised criminal enterprises. 

They still want to be fooled into thinking that the crimes being committed daily by the banks are merely a minor aberration committed by a tiny minority of people who are misguided. They have simply failed to grasp the full implications of the ways in which a committed cadre of organised criminals have run the British banking industry into the ground, and literally stolen its assets through the simple expedient of organised criminality and paying  themselves their insane salaries, their obscene bonuses and above all their bloated pension funds. 

James Crosby alone, the now disgraced former boss of Halifax Bank of Scotland is sitting on a pension pot worth up to £25 million despite his central role in the mortgage giant’s collapse. 

This calculates his annual retirement earnings from the failed lender is estimated to worth around £700,000 a year, according to the Sunday Times. No other citizen of this country would be able to run a major bank into the ground, be publicly humiliated for being a total and utter incompetent, and still be allowed to hang on to sums of money of this value.

It is now clear that if you are a friend of the Tory Government, you can organise and run frauds in the City realising multi-billion pound losses; you can manipulate the world's leading interest-rate setting mechanism to your own financial advantage and you can launder billions of dollars worth of drug money, all of which are straight-forward crimes, and no-one will do a damn thing to prosecute you.

Ironically, this would not have been a true state of affairs under Margaret Thatcher's control. The death of the former Prime Minister has just been announced, and I am reminded of the time just before her second election, when she too wanted to take on the welfare benefit issue as part of her election campaign.

She was reminded by Cecil Parkinson that if the Tories wanted to go up against the benefit culture, in order to be seen to be fair and maintain their working-class vote at the same time, they would have to do something about the plethora of City Fraud which was fast becoming a national scandal.

Her response was somehow typical of her;

'Well. we'd better get the handcuffs on, Cecil!

Later that day, Ernest Saunders was arrested coming out of his solicitor's offices, and the Guinness prosecution was set in train!

Under Cameron's administration and with Osborne riding shotgun on the financial sector, things are very different. You don't have to be an outright crook however, if you are just irredeemably incompetent and you destroy a once-proud bank through your own outright stupidity and arrogance, you can still be allowed to keep all the loot your have squirreled away!

But God help you if you are a single mother on benefits, and your boyfriend chooses to stay over for the night; if you are suffering from serious health issues and are unable to work. Don't try to get a loan to build your business if you are an SME, and don't ask for a pay rise, because there are none coming, and don't get ill because the Health Service we once respected is now run by accountants, not doctors.

The real issue here is not what the politicians choose to tell us, it is what the people who are affected by the changes believe for themselves. As one commentator said to me in Manchester last week, 'It's not too bad for you down in London, in some places there it's hard to appreciate there is a recession, but up here in Manchester, there are many, many, areas where there is real hardship, and where the anger on the estates and run-down housing ghettoes is growing by the day.

People may choose to believe that what Cameron and Osborne are doing is in the best interests of the country, but until they start demonstrating a reality about all being in it together, and taking away from the banksters the proceeds of their rotten games, and locking up those who have committed financial crimes, then no-one, but no-one is going to believe that the austerity programme is 'fair'. 

This is the word that Cameron keeps parroting, that it is fair to attack the culture of benefit dependency, but if he really wants ordinary people to believe him, then he has got to start demonstrating that we live in 2013 and not 1819, because my evening in Manchester demonstrated to me that many in my audience believe that violent social unrest and street violence aimed at the elites is only just a stone's throw away.

Next time, it won't be the hit and run tactics used in Tottenham and copied elsewhere in the country, with gangs of young people just smashing shop windows and stealing designer accessories. Next time, the rioters will be standing their ground, and trading blows with the police, with everything to hand at their disposal. There is a real, tangible visceral hatred of the police in Manchester among the poor and the underclass, and some of the observations made to me about this dislike are very scaring.

Cameron and Osborne have got to demonstrate that there is only one law for all the people, not just the poor and working class, all the while their friends in the elites get away scot free, but that is what is happening. Their bankster friends have already effectively stolen our children's future, and there is a sizeable number of young and dispossessed people who are just waiting for the day to go and steal some of it back. 

Peters' Fields are quiet today, but it will not take too much to see them filled with rioters again, fighting for much the same thing as their forebears fought for, 200 odd years ago. That was the right to be electorally enfranchised - to be treated as equal citizens and guaranteed fairness in their social treatment, a fairness which is being swiftly eroded, by the way in which the elites are being allowed to commit financial crimes with impunity. I predict these events because for many working class people, they have nothing to lose, and a man who has nothing to lose, has everything to gain from his actions.

Regulating the criminal banks in the future and why Standard Chartered Bank deserve a really good kicking!

On Monday 1st April 2013, the Financial Services Authority ceases to exist. Good riddance! I shall not be sorry to see it go.

As a financial regulator, it has been a signal failure and it's regime has been hallmarked by an era of regulatory mismanagement and moral cowardice. It has singularly failed to properly understand the nature of the regulatory requirement, and it has not stood up to the bullies and the powerful banksters who have repeatedly thwarted any of the FSA's best ambitions. This is hardly surprising when so many bankers and Big 4 consultants have been seconded to make up its policy deciders. Its Chairman, Lord Turner, has already scuttled off to join George Soros in New York and taken the chance to trouser another cushy pay cheque, which should make his new job of thinking great thoughts of financial market behaviour, all the more congenial!

Only a few weeks ago, he was admitting to the Commission on Banking Culture that even after all these scams and frauds, he had never once considered training his FSA staff who investigate financial crime, in the history of financial criminality in the hope that they might have gained some experience from the process! Now, a few weeks later, he will soon be promoting deeply intellectual thoughts on how to operate the financial community of the future. Just goes to prove if your face fits, and having a peerage must help, it doesn't matter how big a failure you are, there will always be someone to pick up the pieces and shoe-horn you into another cushy job. He must have been negotiating this move while he was still responsible for the FSA's activities, but let's not quibble about technical niceties.

Why should we blame him, he had nothing to follow. From inception, the FSA's unwillingness to take a firm, pragmatic stand against the activities of the criminals who habituate the Square Mile was made clear, by the craven attitude of its first Executive Chairman, Sir Howard Davis, who presided over the formative years of the FSA from 1997 to 2003. During this time, he made it clear to his staff that he had no appetite for prosecuting financial criminals.

How can I say this so clearly, well one of his senior staff told me so in an interview in 2000. He said to me;

“…There is an anxiety about the new criminal functions which we are being tasked to accept…various elements such as insider dealing, market manipulation, etc, all tend to colour our internal philosophy towards the question of conducting prosecutions. You really should understand, because of the difficulties associated with obtaining convictions in the criminal courts, there is no unswerving acceptance of the need for wholesale prosecution powers…”

This answer was given in such an open way, in contrast to so many other answers which he gave, that he was invited to state why he was so sure that this was the case. His answer was studiously revealing, and must be considered to contain a huge degree of truth. He said;

“…Because, frankly, Howard Davies has no intention of ending up with the sort of reputation which so bedevilled the SFO in its early days. He refuses to be tarred with the same brush as Barbara Mills or George Staple…”

I have been making these observations for many years now, writing and blogging, and hoping that the scandalous inability of the FSA to do its job properly, would be recognised. All I have done is brought down a regime of opprobrium on my own head in so doing.

I have been privately described as a 'brand liability', on the basis that anyone who employed me would be blackballed by the City Establishment. My name was taken off a list of speakers at a major public banking compliance conference because as the Conference owner said, '...none of the clients we want to pay to come to this event will come if they know he is speaking...' I have been shouted down at a regulatory workshop and prevented from speaking openly by the delegates present, and my evidence to the Parliamentary Commission on Banking Standards was conveniently 'lost' and not submitted for consideration to the Commission, until the very last minute, and only after I had raised the issue with the Chairman, and when it was too late for me to give evidence. A pre-arranged meeting that had been booked by a Bank of England Mandarin for me to meet him and discuss anti money laundering concerns, was mysteriously cancelled at the very last minute, the explanation being that it was considered to be inappropriate to be meeting me at that time, but there is no sign it will be reinstated.

I have no complaint, I merely report these facts for your information. I really don't think that anyone who adopts the position I have taken about banks, banksters and organised crime in the banking sector, can expect to be liked by those whom he targets, nor do I expect them to treat me any differently. They have exhibited all the traits and culture expressions of criminogenic actors for so long, it would be naive to expect them, to behave any differently, and I may be many things, but naive ain't one of them!

So, you can imagine my fascination to read today in the Sunday Times, an article written by David Davis entitled "...The watchdogs in need of a good kicking - Our bloated, toothless regulators must be leaner and tougher..."

 He states:

"...In recent years we have seen what happens when industry regulators fail. The Financial Services Authority was asleep as big banks borrowed colossal sums against depositors’ savings, defrauded customers by mis-selling insurance, and grew so large that their collapse was averted only with hundreds of billions of pounds of taxpayers’ money..."

"...The Financial Services Authority was complicit in the crisis that the financial sector created. It encouraged institutions to circumvent unfavourable foreign regulation, and signed off the RBS takeover of ABN Amro that saw the bank collapse. Given that the authority at that time was dominated by people from the banks, it is no wonder the industry’s policeman became its accomplice..."

"...In banking, we will achieve nothing with more and more increasingly complex rules. We need a return to the basic principles that once gave Britain a healthy financial services sector: strong competition between banks, lower barriers to entry for new banks, more lending from deposits rather than leveraging the balance sheet and the breaking up of nationalised banks that have become too big to fail..." 

"...There is room in the British marketplace for up to 30 efficient banks. That would deliver more competition, better service and less financial instability than we have with the Big Four. Our regulators should be smaller and tougher. As institutions, they should be ferociously independent both of government and the industry they are supposed to police. How can we expect our financial regulator to protect consumers if it is dominated by senior bankers..?"

How can we indeed, so, thank you David Davis for repeating much of what I have been saying for some years. I mean it's not as if Davis is just a former detective after all! What do they know? The financial establishment can always ignore them because it is so easy to marginalise them, because no-one likes policemen, do they? Perhaps, the Establishment will now begin to take some notice when an M.P and a member of the political elite speaks out! If they do, then the new Regulator could make a really good start by focusing on giving Standard Chartered Bank a good seeing-to and make them realise that when a bank enters into a Deferred Plea Agreement with a Sovereign State, the process is one which needs to be respected and adhered to in the fullness of its outcomes. 

Standard Chartered was rocked last summer when the New York state's department of financial services accused it of hiding $250bn of sanctions-busting transactions that left the financial system vulnerable to "terrorists" and "drug kingpins" in the six years up to 2007.

Standard Chartered insisted it did not breach sanctions to the extent alleged and settled with the regulators for a smaller breach of the rules, which also included a deferred prosecution agreement to avoid potential criminal sanctions.

At a recent public meeting, questions were asked concerning individual employee conduct and compensation following the deferred prosecution agreements. the Chairman, Sir John Peace had replied, when asked about bonuses for executives: "We had no wilful act to avoid sanctions; you know, mistakes are made – clerical errors – and we talked about last year a number of transactions which clearly were clerical errors or mistakes that were made."

This wilful refusal to acknowledge the truth of the Deferred Prosecution Agreement resulted in an immediate riposte from the US Authorities, and last week, Sir John Peace, was forced to retract his comments describing the breaches as "clerical errors" and apologised for describing them as not "wilful acts" after US regulators were infuriated by his comments at the bank's full-year press conference.

There are some, who like me, will still think that SCB are sticking two fingers up at the US Authorities, by the way in which they have enriched their executives with bonuses and reward payments, following the Deferred Plea Agreement.

In recognising the severity and the seriousness of the DPA it would be appropriate for the bank to make a significant withdrawal of bonus payments for senior executives. Bonuses should be for good work, well done and properly and honestly delivered and in withdrawing such payments, the bank would have sent a vital message. In so doing, they would be acknowledging, both financially and psychologically that their conduct was wrong, that they were guilty of grave criminal offences, and that their egregious behaviour was worthy of significant public and personal opprobrium. Such a series of actions would be an acknowledgement of the importance of the DPA, and would have been an important signal to the rest of the world that SCB recognised their criminal guilt and were willing to both say sorry in the only way a banker can, but also do so openly and transparently.

But in the bank's annual report, published on Thursday, Ruth Markland, the non-executive director who chairs the remuneration committee, explained why it was not necessary to reclaim bonuses. "The committee carefully considered whether the circumstances were appropriate to exercise the clawback of past awards in respect of 2001 to 2007. We concluded that it was not," she said.

That's all, that's it, we concluded it did not, so bollocks to you!

"In reaching this conclusion, the committee also noted that income and profits from the matters that were the subject of the settlements were immaterial, and therefore did not inflate any prior bonus payout in any material manner."

So fuck you, the US Justice Department, fuck you the American Authorities more generally, and a big fuck you to the New York Department of Financial Services. 

This will teach you to think you can play hardball with a British bank, because we will pay ourselves as much money as we want, when we want and where we want and you can stick your DPA where ever you feel like it, because it means nothing to us. 

And this is the entirety of the problem, and it is something that the new Financial Conduct Authority needs to address as a matter of urgency. They need to take a very severe line with SCB, if for no other reason, than to demonstrate to their US colleagues that the FCA will support their findings of gross misconduct and will support the importance of the lesson of the DPA.

Standard Chartered paid its top 16 bankers almost £65m last year. 

No one at Standard Chartered had their bonus clawed back last year – when the bank was fined £415m for busting US sanctions with Iran and other countries and paid its top 16 bankers almost $100m (£65m).

Under the totals provided by Standard Chartered, which include the value of share awards made to directors during the year, the six members of the board received $41m, the largest total of which went to Mike Rees, who runs the wholesale bank and who received $12m. He has earned $52m in the last four years, according to Reuters. Last year the total for all board members was $37.8m.

The bank, which employs 97% of its staff outside the UK, also provided anonymised details of its 10 highest-paid bankers who are not executives. They received a total of more than $50m; the highest-paid of them received $9.4m.

So there you have it. The DPA means nothing to SCB, as far as they are concerned, it's business as usual. Oh, and by the way, just in case you were wondering, Richard Medding – thought to be the banker who exclaimed "you fucking Americans" when warned about the potential violations of sanctions – received $5m. 

The bank insists the quote is inaccurate.

Like Mandy Rice Davis once observed; 'They would say that wouldn't they'!

This week on 4th April, I am talking at the Friends Meeting House in Manchester on the topic of '...How the Banks Gambled Away Your Children's Future..." If you can, do come! More details at http://www.facebook.com/events/490230637696863/

Why the British Banking Industry has become identical with an Organised Criminal Enterprise. Part 3

This is the third and last tranche of evidence I submitted to the Commission on Banking Culture and which their Government Servants sought to suppress.

Regulation by prosecution

47.The recent report issued by the Treasury Select Committee entitled '... Fixing LIBOR: some preliminary findings...' contains very little that    those of us who have long been concerned about the criminal state of the British banking sector did not already know.

48.One of the key findings of the report deals with the relationship between the various regulatory agencies of the State, and the way in which they dealt with the emergence of incriminating details about the LIBOR affair.

49.What this report demonstrates so clearly is the lack of willingness for the FSA to adopt its powers to prosecute financial crime, and the very narrow interpretation they placed upon their function. This reflects earlier findings concerning the attitude of the regulator towards its prosecutorial role uncovered in its earlier days.

51.'...The Committee is concerned that the FSA was two years behind the  US regulatory authorities in initiating its formal LIBOR investigations and that this delay has contributed to the perceived weakness of London in regulating financial markets...'

52.This failure to respond effectively to the early information about Barclays is reflected upon critically by the Committee, as it identifies the likelihood that this evidence may have led to evidence of other wrongdoing elsewhere in the wider market.

53.'...Barclays may well not be alone. Nor is it likely to be a London-based phenomenon. The FSA is continuing to investigate the conduct of seven other banks in relation to LIBOR— some of them non-UK based banks. The FSA’s regulatory counterparts in several other countries are also conducting their own investigations. Barclays is just one of many international banks under investigation for possible market manipulation. It is important that Barclays’ serious shortcomings should not be seen in isolation from the possible actions of other banks             and we await the results of ongoing investigations...'

54.This is a classic scenario which identifies the sheer 'shamateurism' of most British regulatory actions. It is manifested by the failure to be able to read the signs of crime and appreciate the fuller ramifications of their  implications. Thus it is that the regulators tend to focus on simply that evidence which is immediately in front of them, and without seeking to extrapolate from the initial facts what else might be happening in the wider market context.

55.The Committee do not lay the blame entirely on the shoulders of the FSA, they also contribute serious criticism on the actions of Barclays and their Compliance function.

56.'...It is important to state that Barclays’ internal compliance department was told three times about concerns over LIBOR fixing during the period under consideration and it appears that these warnings were not passed to senior management within the bank. Statements that everything possible was done after the information came to light must be considered against a background of serious  failures of the compliance function within the bank.  In other words, the senior management should have known earlier and acted earlier...'

57.This is a damning indictment of the compliance function within Barclays, but it comes as no surprise to anyone who has any experience of this particular criminal enterprise. Compliance Officers were not encouraged to develop pro-active lines of disclosure, nor were they encouraged to think out of the box. They were largely an army of box tickers, but it is even more concerning to note that there did not appear to be any form of channel of communication to escalate these concerns.

58. Every compliance and money laundering 'best practice' manual will talk glibly of the need for a direct channel of communication between the head of compliance and the Chief Executive. They talk of the need for unfettered communication in a discreet and secure manner. How was it therefore that the news of these criminal manipulations were not brought to Bob Diamond's attention at the earliest possible opportunity.  What was standing in the way of the desired state of direct communication?

59.Clearly, there was a culture inside Barclays of 'No bad news please', or 'No surprises'. The compliance department clearly knew what every compliance officer who stays in post for more than a few months knows, they knew what questions to ask and what questions not to ask, and when to go deaf, dumb and blind!

60.A major part of the report deals with the FSA's failings to take strong executive action when financial criminality is discovered. It is as if the FSA has taken a deliberately blinkered view of their powers and has refused to look beyond and outside their most immediate remit. This is very disappointing because it has been hoped that the FSA would begin to take a more robust approach towards its powers to prosecute  financial crime, after the introduction of the FSMA in 2000.

61.Financial practitioners do not fear regulatory fines, mostly because they are not individually called upon to pay them. The burden always falls on the shoulders of the shareholders, many of whom, if the Standard Chartered Bank case is anything to go by, will not even blame the Executives of the bank for landing them in this mess in the first place. Regulatory findings will always find fellow practitioners who are willing to sympathise with them. Public scandal can be difficult to handle, but rarely does an executive get forced from office. He may quietly resign at a later stage, but he does so with a well-padded pension fund and other benefits to cushion his existence.

62.This whole issue of the suitability of punishment for serious wrong-doing has been a critical element of the longer-term failures of the FSA to bring a robust approach to the regulation of the UK financial market.  Ultimately, it is prosecution for crime which the financial practitioner truly fears, but if the market knows that the regulator is deliberately avoiding adopting its prosecutorial role, then this will lead to a realisation that the regulator has no real teeth!

63.It has always been one of the greatest ironies of the whole regulatory conundrum that criminalisation for simple offences of ordinary 'crime' is one of the greatest fears of the Executives of the financial sector.

64.Ironically, it is not necessarily the sentence which is passed which is of the most importance, the true fear of the financial practitioner is of the verdict of 'guilty' being publicly pronounced in open court. Such a verdict immediately takes away the sense of being a 'protected species' which too many banksters have believed they possessed for too long.

65.A criminal conviction places them on a par with other ordinary criminals, people who under any other circumstances they would go out of their way to avoid like the plague. The fact of conviction now puts them in the same 'criminal class' category and it spells social and commercial death for any city practitioner who has been so convicted. It  is the ultimate exclusionary weapon of social and reputational mass destruction.

66.So powerful is the impact of criminalisation that even those who had once called the convicted man a friend find it very difficult to continue to see him, even in a private social context. As for any further dealings with him on a commercial context, such a thought would never enter their heads. He is now entirely beyond the pale, and he can never be received again inside the magic circle.

67.This may be what makes it so difficult for regulators to bring such a powerful weapon to bear on those whom they perceive may come from the same class and socio-economic background as themselves! They won't admit this of course, and they tend instead to use the excuse that       financial crime cases are too difficult to get convicted, that juries do not understand them, although that has never been my experience.

68.This was one of the major problems about the predecessor of the FSA, the Securities and Investments Board, who absolutely refused to contemplate prosecuting any financial practitioner for crime.

69.In 1999, I was invited to conduct a review of financial services regulation for the UK Treasury. Among other people I interviewed was a senior staffer from the SIB who would be moving into the new FSA. I asked him about the powers to prosecute possessed by the new regulatory agency.

70.'... the official concerned was more forthcoming. He agreed that the FSA would become responsible for a far greater degree of responsibility for prosecution in a number of areas, including money laundering issues, but felt that this predicated the need for a further regulatory interface. He said;

71.“…There is an anxiety about the new criminal functions which we are being tasked to accept…various elements such as insider dealing, market manipulation, etc, all tend to colour our internal philosophy towards the question of conducting prosecutions…you really should       understand, because of the difficulties associated with obtaining convictions in the criminal courts, there is no unswerving acceptance of the need for wholesale prosecution powers…”

72.This answer was given in such an open way, in contrast to so many other answers which he gave, that he was invited to state why he was so  sure that this was the case. His answer was studiously revealing, and must be considered to contain a huge degree of truth. He said;

73.“…Because, frankly, Howard Davies has no intention of ending up with the sort of reputation which so bedevilled the SFO in its early  days. He refuses to be tarred with the same brush as Barbara Mills or George Staple…”

74.The Treasury Select Committee has clearly identified that this mentality still exists within the regulatory environment. They state;

75.'...The FSA apparently believes that its fees are not raised for the purpose of prosecuting offences other than those set out in FSMA. The Committee is concerned by this. The FSA has responsibility for regulating the key participants in financial markets. The FSA’s decision whether to initiate a criminal prosecution should not be influenced by the fact that its income is derived from firms which it regulates. The FSA has an obligation under section 2(1)(b) of FSMA to discharge its functions in the way in which it considers most appropriate for the purpose of meeting its regulatory objectives.

76.Under section 2(2)(d) the reduction of financial crime  is one of these objectives. Financial crime is defined in section 6(3) as including not only misconduct in relation to a financial market but also any criminal offence of fraud or dishonesty. The FSA took a narrow view of its power to initiate criminal proceedings for fraudulent conduct in this case. The Committee recommends that the Government, following the Wheatley review, should consider clarifying the scope of the FSA’s, and its successors’, power to initiate criminal proceedings where there is serious fraudulent conduct in the context of the financial markets.

77.That this state of affairs still exists after all these years is a matter of deep concern and the Committee rightly urges direct reforms of this state of affairs.

78.'...The Committee urges the Wheatley review to consider the case for amending the present law by widening the meaning of market abuse to include the manipulation, or attempted manipulation, of the LIBOR rate and other survey rates. They should also consider the case for widening the definition of the criminal offence in section 397 of FSMA to include a course of conduct which involves the intention or reckless manipulation of LIBOR and other survey rates...'

79.Again, the Committee saw fit to criticise the length of time taken by the SFO to open an investigation and demands that a new relationship be forged between the two agencies. There is no reason why that FSA and the SFO could not and should not operate in tandem when conducting investigations, so that if, as it seems, the FSA is unhappy to mount prosecutions, then the SFO can adopt this mantle.

80.'...The Serious Fraud Office (SFO) is now conducting a criminal  investigation into LIBOR. The Committee was surprised that neither the FSA nor the SFO saw fit to initiate a criminal investigation until after    the FSA had imposed a financial penalty on Barclays.

81.The evidence in this case suggests that a formal and comprehensive framework needs to be put in place by the two authorities to ensure effective relations in the investigation of serious fraud in financial markets. The lead authority must be clearly identified for the purposes  of an investigation, and formal minutes of meetings between the authorities must be maintained. We recommend that the Wheatley review examine whether there is a legislative gap between the responsibility of the FSA and the SFO to initiate a criminal investigation in a case of serious fraud committed in relation to the financial markets...'

82.Quite rightly, the Committee's report makes reference to the issue of public anger against that banks in the UK. They are right so to do. The British public is sick and tired of watching their financial affairs being raped and pillaged by the criminal banking sector. They have lost any sense of trust in the banking sector, trust which is vital for the effective running of the market. A report today by Currencies.co.uk discloses that 62% of British citizens have lost trust in the banks. The Committee knows that this state of affairs is very dangerous for uk plc, and they call for some focused thinking on behalf of the banking sector.

83.'...The findings have focussed pre-existing public anger with banks. Barclays is one of many instititutions that have contributed to the state of banking’s reputation. LIBOR has followed the vast public bailouts of     banks during the financial crisis, the liquidity support and guarantees given  to all banks and the apparent lack of penalties for those who contributed to that crisis, most of whom retained very high levels of remuneration even after 2008. More recently there has been the scandal of payment protection insurance (PPI) mis-selling, criticism of banks’ perceived reluctance to lend, complaints about the sale of unsuitable and complex interest rate swap  products to businesses (which are under investigation by the FSA), and serious IT failures at RBS Group. The economy needs well functioning banks. They will have a crucial role in any economic recovery through their lending to businesses and households. An end to crude ‘banker bashing’ would be  highly desirable, but bankers must recognise that they have brought much of this upon themselves through actions which have seriously damaged public confidence.  While banks continue to provide evidence that wrongdoing persists the popular mood is likely to remain hostile...'

84.For myself, I believe that the issue has gone too far, and the genie is out of the bottle. The only way these organised criminal enterprises can be dismantled is for a root and branch reform of the banking sector, breaking up the big conglomerates, jailing a lot of 'too big to jail' bankers, and reintroducing an environment where banks become the servants of the community and the economy, and not high-rollers in the most unregulated casino on the planet.

85.So, this Commission is an excellent opportunity for Government to take a close look at the way in which the financial sector is policed, because unless something drastic is done to change the way in which the financial sector is regulated, then we shall continue to suffer from the kind of scandals that have made London a cess-pit, the venue of first resort for every con-man, scam-artist and bankster in the world, rapidly ensuring our descent into the ranks of the global pariah states.