It’s job done as far as Britain’s banks are concerned.
The departure of Martin Wheatley as the head of the City’s watchdog marks a triumph for the forex fiddlers and the Libor manipulators, but a defeat for the rest of us. The clock has been turned back eight years to the bad old days when the last Labour government ensured that what the banks demanded, the banks got.
George Osborne was, of course, full of praise for Wheatley as his resignation was announced. The outgoing head of the Financial Conduct Authority was “brilliant”. He was “passionate” about defending the interests of consumers. A bit too passionate, it seems.
Wheatley’s tough approach prompted complaints from the financial sector. The chancellor could not set foot in the City of London or Canary Wharf without being lobbied by a banker or an insurer telling him that the FCA’s zero-tolerance approach to financial malfeasance was threatening to drive business away from the UK. Unspoken, but doubtless lurking in the background, was the warning that donations for the Conservative party were on the line as well. The City wanted Wheatley out.
Osborne’s capitulation means the rehabilitation of the banking sector is now pretty much complete. For a while after the financial crash that they caused, the banks decided to lay low. They were suitably penitent about the mistakes that had been made, merely noting that punitive measures against such a big export-earning sector would be a mistake.
Over the years, though, the bullishness has returned. HSBC felt confident enough to warn during the election campaign that the “regulatory and structural” reforms imposed following the crash had forced it to consider moving its HQ out of London. In this context, “regulatory and structural” meant the government’s bank levy and Wheatley’s regime at the FCA.
Osborne got the message. In his budget earlier this month, the chancellor announced that he was reducing the bank levy and making it applicable only to a bank’s UK operations. Experts estimate that for HSBC, which does most of its business outside the UK, this will mean its payments to the exchequer are reduced from £1bn a year to £300mn. Ker-ching.
Now Wheatley has gone as well, taking the decision to quit immediately after Osborne said his contract would not be renewed next year. The message from Whitehall could not be clearer. Goodbye to big fines. Its back to business as usual.
This article was written by Larry Elliott, for theguardian.com on Friday 17th July 2015 16.53 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010