New year, same banks?
January 22, 2016
2016 is barely three weeks old and yet throughout the business pages talk is rife of the next financial crisis. RBS economists have advised investors to “sell everything”, markets are panicking about a slowdown in China, and central banks keep interest rates at historically-low rates for fear of rocking the boat.
In the midst of all this sensationalism and fear-mongering, Britain’s biggest banks are quietly carrying on with business as usual. Having successfully lobbied for tax breaks and preferential treatment last year, they’ve stepped up their game in 2016 already, winning quiet favours from government through the back door.
You’d have thought that the bank would be under close watch this year, given that last years tax leaks showed the bank helping more than 1,100 UK customers evade tax.
Sadly, you’d be mistaken. First the toothless UK regulator dropped its investigation into the HSBC tax leaks, claiming that it was HMRC’s responsibility to follow up. Then merely days later, HMRC also dropped its investigation, giving barely any justification. To date, HMRC has pressed charges against only one of the 1,100 rich Brits identified as having “irregularities” in their tax affairs.
In the words of Stephen Phillips, a conservative MP who sits on the Treasury Select Committee, “there it is, it looks as if they have got away scot-free. There seems to be one rule for the rich and another for the poor.”
In a tried and tested method, HSBC is again delaying its decision on whether to move its HQ out of Britain, holding the threat of leaving the UK as a way to gain concessions and curry favour. Expect more shenanigans and anti-regulation lobbying from the banking behemoth this year.
The lack of any real regulation was widely held up as a reason behind the last crash, yet the same approach increasingly seems to be the case in the UK in 2016.
Since Martin Wheatley was sacked by George Osborne in July last year, the main banking regulator, the FCA, has become more and more relaxed about big bank behaviour. Not only is the body still to recruit a replacement Chief Executive, but they’ve also dropped a major investigation into the banking culture that helped cause the financial crisis. Instead the FCA has promised to work with the banks on “an individual” (and invariably private) basis, behind closed doors, and with no opportunity for public scrutiny.
The decision was blasted by the head of the Treasury Select Committee as reminiscent of a “road accident.” Criticising the regulator and it’s top staff, Andrew Tyrie MP said that the regulator’s communication was “chaotic,” and that its recent decisions “suggest that there is something wrong with the culture of the FCA itself.”
Meanwhile, the former head of the British Bankers Association, Angela Knight, has been hired by the Treasury to the mysterious Office of Tax Simplification. Angela Knight, lest it be forgotten, was in charge of the BBA when it was supposed to be monitoring and managing LIBOR, rather than letting it be fraudulently rigged by banksters looking for a quick buck.
Since her new appointment Ms. Knight profusely apologised for the banks’ role in the financial crisis, before explaining that the Office of Tax Simplification “is not an organisation that decides on tax,” adding that it was not set up to tackle tax avoidance or evasion. Given Ms. Knight’s previous role in defending and promoting serial tax evading banks, it remains unclear exactly what her 2-days-a-month role actually is with the OTS.
And then of course, there is always RBS. Last year Move Your Money exposed RBS as the worst bank for branch closures, and also showed that 82% of the public think the taxpayer-owned bank should be run in our interests.
Yet despite RBS’ obvious failings as a private bank, Osborne ploughed on regardless and sold off the first tranche of public shares at a massive loss for taxpayers. The idea was that more shares on the open market would stimulate sales and increase the share price, and the government could return the bank to the “good hands of the private sector” that caused the crash and the bank to fail in the first place.
Instead, the opposite has happened. The RBS share price has continued to plunge, whilst its hysterical warnings over the next financial crisis has triggered a massive debate about whether 2016 will be the new 2008. In the midst of the chaos, RBS continues to abandon communities, and looks less likely than ever to provide the type of public-interest banking that we so badly need and deserve after the bank’s £45 billion bail out.
So 8 years on from the financial crisis and another rosy year looms. Whether the toxic cocktail of big bank lobbying, weak regulation, and an industry impervious to public needs results in a new crisis remains to be seen. But as the turbulent outset to another year in banking shows, it’s gonna be one hell of a ride in 2016.