A decade on from the financial crisis, finally a senior regulator has shown the courage to speak out on the failure of UK authorities to make bankers pay the price of bringing the system down.
The greatest damage was done to families who saw returns on savings wiped out and incomes squeezed.
In a forthright interview with the Mail on Sunday, Financial Conduct Authority chief executive Andrew Bailey expressed annoyance about a lack of accountability.
Frustrated: Financial Conduct Authority chief executive Andrew Bailey expressed annoyance about a lack of accountability
Bailey is frustrated that bankers at the vortex of the crisis, such as Sir Fred Goodwin of Royal Bank of Scotland and Andy Hornby of HBOS, escaped without censure.
They should at the very least have been banned as directors. As a leading contender to be the next governor of the Bank of England, it should be in Bailey’s own hands to adopt a more robust approach.
When the weather let Britain down over the holiday weekend I caught up with the Danish TV series Follow The Money. The plot bears an uncanny resemblance to what went on at RBS subsequent to the crisis.
The grasping behaviour of RBS’s Global Restructuring Group sent small and medium-sized enterprises to the wall. It then grabbed the assets on the cheap – a theme mimicked by the Focus arm of fictional Nova Bank in the Danish show.
The big difference between the UK and the fictional Danish approach to a far-reaching scandal was the determination in Denmark of two low-ranking fraud officers to spend every waking hour making sure those responsible for appalling behaviour were brought to justice.
Contrast this with the feeble way in which the FCA let individuals involved in running GRG off the hook on narrow legal grounds, claiming it lacked powers to do more.
What Bailey and the FCA do have is moral authority and a platform to hold those responsible to justice. The least the FCA could have done was to pass files to other competent authorities for further investigation. Many of the bankers involved in restructuring at RBS hold high office in other banks and have avoided punishment.
Moreover, we still await detail of who knew what at Lloyds Banking Group about the fraud at HBOS’s Reading branch. The public has a right to be told if there was a cover-up to save the reputations of all those involved in the Lloyds-HBOS merger.
City regulators often tie themselves in legalistic knots and go on the defensive rather than seek a path through the thicket. In the US, federal prosecutors often use obscure legislation such the Wire Act to bring perceived offenders to justice.
All it requires is imagination and willpower. These are characteristics sadly missing from UK financial justice.
Theresa May arrived at Downing Street determined to combat the image that the Tories were soft on capitalism.
Instead, disgraceful abuses have continued in Britain’s boardrooms.
The construction and outsourcing group Carillion went to the wall leaving employees, the pension fund and suppliers up a creek without a paddle in a giant Ponzi scheme. Directors and shareholders filled their boots. At housebuilder Persimmon, a Government subsidy in the shape of Help to Buy enabled chief executive Jeff Fairburn to earn rewards worthy of Russian oligarchs. Meanwhile, overpaid directors at Melrose swallowed old-established engineer GKN and will in all probability break it up for vast sums.
The Government’s response to abuse is to tighten up insolvency laws. It wants to punish bosses who dissolve firms to avoid paying staff properly or pension obligations.
Ministers want the Insolvency Service to check why companies are paying dividends and fat salaries to directors, as at Carillion, as they drive companies into the buffers.
Reforms to insolvency laws and governance are long overdue. But as is the case with the bankers, it is not much use having tough laws if weak regulators are unwilling to fight the good fight.
No surprise that Chris Miller and his merry band at Melrose are ready to ditch GKN’s powder metallurgy division for £1.8bn.
After all, that is what indebted asset- strippers do. But it should be remembered that the powder coatings applied by GKN to advanced military aircraft protect against detection by the enemy. If an overseas sale is planned, then Defence Secretary Gavin Williamson should intervene.