ALEX BRUMMER: Bending the rules at Barclays - the scandal-prone bank that just can't seem to learn from its mistakes

• e-mail

It is hard to be shocked about the disclosure of the latest Barclays sins. 

The bank appears to have learned nothing from the mistakes made in the run-up to the financial crisis and was so intent on making money by hook or by crook that it danced around the money laundering regulations.

The £72million penalty imposed by the Financial Conduct Authority may be the biggest it has ever levied but is still second division when compared to fines paid by American banks such as JP Morgan Chase and British recalcitrants HSBC and Standard Chartered.

The case involving a £1.9billion transaction for an undisclosed client tells us a great deal of what went wrong inside our major financial institutions. 

Barclays appears to have learned nothing from the mistakes made in the run-up to the financial crisis

The term ‘deal of the century’ used by one senior banker as he sought to rush through the loan package is the kind of language used by the domestic hawker seeking to sell you a new driveway.

But what is equally disturbing was the determination to keep the deal away from prying eyes to the extent of putting the documents involved in a special safe.

We all value bank security especially in this age of cyber-crime and hacking but Barclays is not MI6, and Bob Diamond, who was chief executive at the time, is not ‘M’.

What we do know about the period was there was a desperation to be as profitable as possible so as to build reserves and avoid intervention by the regulators. 

There was also an ingrained bonus culture which encouraged rash decisions and has still not been overcome. The incentives for cutting corners were simply too great.

One of the greatest errors often made by people who engage in illicit actions is to try to cover them up. In the Barclays case there was a contemporary ‘cover-up’ in that documents were held closely and the usual compliance not really tested. The FCA looks to have let the bank off the hook on this because it co-operated.

That may make life easier for the regulator, which deserves some credit for uncovering the inappropriate transaction, but is not in the greater public interest. 

If ever there was an infringement of the bank’s ‘social licence’ it was this and we must wonder how many more of the deals in its notorious structured debt operation – wisely closed down by former chief executive Antony Jenkins – still lurk in the darker corners of the bank.

The latest run-in with regulators may not be quite the welcome gift which new chief executive Jes Staley had been waiting for. But it will provide him with useful reminder, if he needed it, that despite all the talk of ethical cleansing there is no telling the number of maggots lurking beneath the surface.

Simple racket

The big headlines may be made by money laundering, LIBOR and Forex cheating and wrongful selling of mortgage security products but there is no escaping the fact that the biggest malfeasance at the banks was in their retail arm.

One of the aims of post-crisis rules and laws has been to prevent contamination from investment banks from reaching plain utility banks.

But as last week’s report on HBOS demonstrated, in the wrong hands a ‘simple’ bank can go horribly wrong too.

Indeed, the costliest behaviour for Britain’s high street banks was the payment protection insurance that has left the sector with an estimated £28billion bill.

And it is by no means over. The claims companies still are irritatingly on the case and a Supreme Court ruling on the right to recover commissions set at more than 50 per cent has added another potential layer of complication and costs.

Nevertheless, after all this time consumers have had long enough to do their complaining and allowing this compensation culture to run on for much longer is pointless. 

By setting a deadline for 2018 the Financial Conduct Authority has been more than generous.

Enough already…

Small pickings

The Chancellor’s proposal that Britain should have its very own Sovereign Wealth Fund, in the manner of Norway, Russia and the Gulf potentates is an excellent idea.

It may be especially necessary at a time when Britain’s current account is deeply in deficit and very short of overseas investment income.

The creation of a Shale Wealth Fund seeks to learn from the mistakes of the North Sea where most of the accumulated tax revenues were frittered away by building an over-elaborate public sector.

The difficulty is that the economics of shale gas in the UK are being destroyed by low global energy prices and the ladling on of environmental costs.

Even on the most optimistic of projections this particular fund will always be a weakling.

Not quite good enough, George.