UK banks are ‘sticking up two fingers at regulators’ and must be held to account for crashing the ‘entire British economy’, says Oldham and West Royton Labour MP Michael Meacher.
Mr Meacher’s rallying cry for those who abuse their professional positions to be prosecuted comes after the Financial Conduct Authority (FCA) imposed a fine of £14million on RBS for deficient mortgage record-keeping and poor advice to borrowers.
Over the pond, the Bank of America has been fined $16.7billion for misleading investors in its mortgage-backed securities.
“It [FCA] has still not imposed any penalty on RBS for its far more serious offence regarding the sale of US mortgage-backed securities,” Mr Meacher said.
“By contrast, only last week the US regulator fined Bank of America $16.7billion (£10.2billion) for misleading investors in its mortgage-backed securities – nearly 1,000 times more than the penalty just announced for the British bank.
“This colossal difference in the impact of regulation between the US and UK goes a long way to explain why the UK banks are still continuing to get away with impunity after nearly crashing the entire British economy.“
Mr Meacher also said the banks have not a ‘shred of remorse for the havoc that they caused’, and said ‘light touch’ regulation, a euphemism for its almost total absence, still rules.
“But it’s even worse than that, with the UK banks now sticking up two fingers at the regulators at every opportunity,” he said.
“Now this year all the big four – HSBC, Barclays, Lloyds and RBS – awarded senior executives fixed pay allowances to get round the EU cap on bonuses at 200% of salary.”
“Two fingers to regulators seeking to curb obscene bonuses. Then the British Bankers Association attacked the Bank of England’s plans to extend the claw-back of bonuses to seven years.
“Two fingers to regulators trying to reverse bonuses later found to be wholly unjustified.”
He has now called for the by the FCA to follow suit and hold those guilty of wrong-doing to account.
He said: “Once again it is instructive how they do things in the US, the citadel of capitalism, which is so very different from the secretive British State which protects its elites even from their worst wrongdoings.”
In addition to the fine, the Bank of America was ordered to lower the mortgages of homeowners in negative equity and to reimburse some who incur higher tax bills as a result.
An extra $7billion must also be paid to communities still struggling to recover from the housing crisis the bank caused.
“A colossal sum which vastly exceeds any penalties imposed on UK banks which were paltry by comparison, even though they were guilty of exactly the same malfeasance,” exclaimed Mr Meacher.
“Why is the same not being imposed on the big four UK banks – HSBC, Barclays, RBS and Lloyds?”
Furthermore the Bank of America judgement did not prevent any criminal charges against the bank or its employees.
In Britain no banker has been fired and disqualified from financial office, let alone prosecuted and sent to prison.
Mr Meacher thinks this is ‘absurd’, especially when compared to the harsh penalties imposed on people at the other end of the spectrum, such as the unemployed who can have their benefits stopped for four weeks if they’re five minutes late or in hospital.
He said: “Destitution for a relatively petty ‘offence’ in the latter case, and impunity for helping to tank the UK economy in the former case.
“The class disparity is as stark as it is outrageous.”
In response, J.P. Craig-Weston, a commenter on Mr Meacher’s blog, said: “I find it strange that instead of advocating a more relaxed and less vindictive approach to unemployed people claiming benefits for example, you’re declaiming this kind hysterical twaddle again.”
The MP, however, believes harsher penalties should not just be extended to bankers, but also all senior professionals such as doctors, MPs, police, judges and the media.
He posted a letter containing his complaints and suggestions to the FCA yesterday and is awaiting reply.
A spokesman for the FCA said they are already holding individuals to account, imposing fines and, more importantly, banning people from the industry when they are found to have fallen short of the expected standards.
He added: “What is more, those who wish to hold senior positions within the industry or who work in certain roles have to prove to us that they are fit and proper – if they can’t then we will not give our approval.”
While the current regulations and punishments in place clearly do not satisfy the call of Mr Meacher for potential prosecution of individuals, the FCA is in the process of clamping down.
The Banking Reform Act currently being implemented is expected to change the personal accountability of potentially the most senior individuals working in our banks.
The FCA said: “In future, those alleged to have acted recklessly while in senior positions at banks that fail could face prosecution.”
Will these changes be enough to stop senior professionals from abusing their roles to the severe detriment of public interest? Mr Meacher thinks not.
He said: “I don’t think that what they’re currently proposing is at all rigorous and tight enough. Too many ‘maybes’ to bring about the major change in behaviour that I’m demanding.”
“Accountability in Britain has virtually collapsed and it urgently needs to be robustly restored,” he concluded.
Mr Craig-Weston on the other hand presented a more cynical argument, posing the question: “In a climate where the likes of Stephen Green, Blair and far too many others like them are increasingly unapologetic about lording it over the rest of us despite all their well attested ‘lapses’, what hope is there for anyone less wealthy, less professionally represented or well-connected of getting fairness or justice?”
You can read Michael Meacher’s full argument and responses on his blog page.
Image courtesy of Jeremy Sutcliffe, via Flickr with thanks.