George Osborne has said City fraudsters should receive the same treatment as shoplifters as he joined forces with the governor of the Bank of England, Mark Carney, to promise the public that the scandal-hit financial sector was being cleansed of wrongdoing.
The chancellor said he understood the anger felt by voters towards bankers guilty of multimillion pound rip-offs and said they should be treated like other criminals if they broke the law.
In a combined show of intent by the UK’s top economic policy makers at an event designed to tackle public disquiet over the state of one of the economy’s most important sectors, Carney said there was still work to do to root out the City’s “bad apples”.
The governor and the chancellor were speaking at an initiative by the Bank to justify the purpose of financial markets after the banking crisis and market-rigging scandals in the interest rate and current markets. These events had shown the markets were “fragile, unfair, ineffective and unaccountable”, Carney said.
Osborne used his appearance at the Open Forum – a gathering of bankers, policy makers, academics and members of the public – to justify tougher action against those who manipulated financial markets.
The chancellor said fines on the industry were working, saying “if anyone thought that being unethical in the financial services industry is a good way to make money I suggest they look at the very big fines” levied on the industry. US, UK and European banks have been fined more than $150bn by international authorities since 2009.
Osborne said he totally understood the public’s anger at the bankers, who had been responsible for the “biggest single economic crash of our lifetimes”.
He added that there were punishments for shoplifters but “if you rip off people to the tune of millions of pounds, there are no criminal offences”.
“If you go and shoplift at the local WH Smiths you go to prison, but if you’re the market trader on the trading floor of a big investment bank and you rip off people to the tune of millions of pounds, there are no criminal offences available to deal with you,” said Osborne. He had now changed the rules, he said.
Carney said that under new rules to be introduced in the New Year, senior managers would have to ensure that junior traders and fund managers knew what a “true market” was. Despite a series of changes to the way the City operated there was still more to be done. Some rules may need to be rethought, he said.
“The era of ‘heads I win; tails you lose’ capitalism is drawing to a close. Complex webs of derivatives are being simplified and made safer. We are also working to turn the tide of ethical drift,” Carney said.
In an interview with Sky News, Carney said: “There is still work to root out those bad apples but I think we’ve got to recognise that there is a lot of good in financial services. It makes a huge difference to our economy.”
Carney spoke of the need for the Open Forum at the Mansion House speech in July and called for 10-year prison sentences to clamp down on bad behaviour. Only a third of people believe markets work in the interest of society, the governor said.
The event took place at a time when the industry is questioning some of the rules put in place since the 2008 crisis to make bankers more accountable and banks less likely to need taxpayer bailouts and markets more difficult to rig.
Referring to these changes, Carney said: “Misconduct will be met with genuine penalties. By holding individuals accountable, authorities are ending the age of irresponsibility.”
But the governor acknowledged changes to the rules might be needed: “Given the complexity and scale of financial reform, it would be remarkable if every measure were perfectly constructed. Or if they all fit seamlessly into a totally coherent, self-reinforcing whole.”
Just a handful of the 400 or so audience members raised their hands when asked it if was case of “job done” in terms of regulatory reform.
Tracey McDermott, acting chief executive of the Financial Conduct Authority, was asked if the regulator was going soft on the City after imposing a wave of fines and compensation payouts. “We can’t have a sustainable regulatory framework, can’t have customer trust … unless we are actually starting to look … at what we want the future to look like,” she said.
She added later: “I am not going soft on the banks … If we take the stick away the carrot won’t be useful.”
This article was written by Jill Treanor, for theguardian.com on Wednesday 11th November 2015 19.48 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010