How Select should criticisms of banking culture be?

It appears that everyone is running around shouting about the latest financial services scandals (Libor/Euribor, Interest Rate Swaps).  Heads are being demanded on the proverbial platters but that seems to me to miss the underlying issue.
 
Questioning Bob Diamond (late CEO of Barclays) in front of the Treasury Select Committee, Mark Garnier MP [Conservative, Wyre Forest] highlighted that owing to the culture of Libor Rate Setting within Barclays for years prior to 2007 Rate Setters were not reporting attempts by traders to fix the reported rate (on behalf of the bank).  This depicts a cultural mismatch between attempted criminal behaviour and reporting to senior management or Regulators.
 
In the USA the Federal Reserve had noted that banks on average were reporting their borrowing costs some 36 basis points below what was being signalled via other measures.  A number of Regulators also noted in various reports at the time of the Financial Crisis in 2008 that there was a mismatch between the reported rates of interest being paid by banks and independent measures – indicating that something was amiss.  However nothing else ensued to ascertain whether something was wrong.  This led Andrew Tyrie MP, the Chairman of the Treasury Select Committee to hint that the Regulators “were asleep at the wheel”.
 
Diamond has acknowledged that the problems (at Barclays and in other Financial Services scandals) have arisen due to the culture in place – but nothing has been said about how that might have been made more robust.
 
Regulators banks and politicians have missed the fundamental issue that how we allow people to manage culture in large corporations is the seat of this type of problem.  More to the point, there are no natural checks and balances that make it easy for employees (whatever organisation they belong to) to point things up as being adrift from an acceptable standard.  John Mann MP [Labour, Bassetlaw] highlighted that Diamond and his senior team apparently had not even attempted to question the possibility that things might not be OK despite the reports that had been floating around since around 2007.  A teflon response indicated that Diamond and those of his ilk simply don’t want to step up and recognise that they have a responsibility to ask questions before things are highlighted as having gone wrong.
 
The pressure to ask such questions would be more acute if the organisational culture had a clearer set of benchmarks for end-to-end impacts on all stakeholders.  This, in turn, would put pressure on other organisations to behave better.  Transparency is a huge incentive to be seen to be doing things right.  Transparency, however, requires effort to be maintained.  It seems, for the past few years at least, that hasn’t been the top priority of those in charge.

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