A tale of two traders

August 5, 2015



Like London buses, stories in the banking industry can often be nowhere on the horizon – until two suddenly arrive at once.

That was certainly the case this week, when the City – and indeed, the rest of the country – was rocked by a tale of two traders.

First was the plight of Tom Hayes, the former UBS and Citigroup trader who was rightfully convicted of Libor rate-rigging, with documentation of his crimes dating back almost ten years. For some, justice comes slowly.

In delivering the 14-year sentence, only half of which will be served in custody, Mr Justice Cooke said that Hayes had conducted fraudulent behaviour ‘motivated by greed and high pay.’

The trial revealed that Hayes had benefitted personally through bonuses and so-called “performance-related” pay from his actions. Hayes himself boasted that he had made over £150 million for UBS, partly based on these illegally rigged rates.

The fact that banks and their traders benefit financially from such criminal behaviour will surprise precisely no one, but to have it confirmed and exposed in court at least sheds some light on one of the least transparent yet most important industries in the world. Making regulatory fines comparable to the profits from those crimes, however, is still a battle yet to be won.

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UK fines administered by the FCA are paltry by international standards

Much of the reporting that followed seemed incredulous that the 14-year prison sentence was so tough, yet the real question is how far up the chain these prosecutions will now go.

Hayes’ defence ultimately rested on the claim that “everybody was doing it,” and that the executives at the bank had full knowledge of his activities. As Matt Taibbi noted when the scandal broke in 2012, all 16 Libor banks had to be in on the scandal for it to work. That’s a lot of executives, and a lot of traders that by rights should be brought to justice.

So far, the Serious Fraud Office has cases against a further 12 traders. But singling out the “unlucky 13” will do nothing to end endemic and systematic corruption in the globalised financial industry. This is not the case of a few bad apples, after all, but instead an entire orchard estate rotting to its very foundations.


Across the city on the opposite bank of the Thames, another trader was making a very different, though no less odious deal.

Having warned of a sell-off back in June, the Chancellor, George Osborne, acted decisively, selling 5% of RBS’ shares overnight to institutional investors – in other words, to hedge funds, banks and pension funds.

In a classic sign of market prediction, RBS shares plummeted before the sale started. Not only did this mean that traders were “shorting” the stocks in anticipation of a bonanza on the taxpayer, but it also meant that the shares were trading at their lowest level this year by the time of the sale – crystallising an eye-watering £1 billion loss to the public.

At those prices, the New Economics Foundation had to round up its estimate of total losses to the taxpayer to over £14 billion on the sale of RBS. Such a staggering loss has divided the country, with even pro-privatisation advocates arguing fiercely that this was most likely the worst time to sell.


But as with Tom Hayes’ rate-rigging case, the broader question has largely been missed. The bigger issue is not whether RBS shares should be being sold now, but whether they should be being sold at all.

When run privately, the bank has proven to be woefully inadequate on any measure of banking that matters – whether that’s providing access to financial services, providing credit to businesses and local economies, or in distributing risk and providing stability to the financial system.

So why then such a rush to re-privatise the bank?

In announcing the sale, the Bank of England, the Treasury and UK Financial Investments (which holds the RBS shares on behalf of the public) have all referred to their own ‘assessments’ showing that now is the best time to sell.

Yet none of these ‘assessments’ are in the public domain. All that is available is a series of back-slapping letters between government departments and quangos, agreeing haughtily that the sale represents ‘value for money’ for the taxpayer – despite absolutely no evidence to back up this claim. The public has been completely excluded from the debate around the future of RBS, and now we are being robbed of our dues from a bank we already own.


Real value for money on an investment of £45 billion would be a bank that serves local communities, generates jobs, growth and wages, and which supports the economy in times of crisis, rather than bringing it to its knees – of which there are no shortage of proposals to make this a reality.

Sadly, sensible proposals fall flat on deaf ears when short-sighted traders have a sale in their sights.

And in London’s tale of two traders, it’s the scale of the sale and the time for the crime that have picked up headlines – rather than the direction in which we’re headed, and the destination we want to reach.

More’s the shame, as Britain – and the public – is much the poorer for it.

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