by Alasdair Macleod
The LIBOR scandal has been hogging headlines of late, with questions raised again about the extent to which big banks are now a law unto themselves; the focus on Barclays obscures the fact that other banks are likely to be found guilty of the same offence. The practice has been going on seemingly since at least 2005. The scandal has not only attracted fines, but it exposes the banks concerned to customer refunds and civil actions of amounts potentially in multiples of their core capital.
It lends support to the view that banks have lost sight of their responsibilities to their customers. This was the inevitable outcome of London’s “big bang” in the early 1980s, when the banks muscled in on securities-trading and derivative markets. The reason the rot started in London was that the Glass-Steagall Act restricted the ability of commercial banks to mix investment and banking activities in the US, so Wall Street was ready to “move” to London. The Conservative government in the UK took the hint and forced the London Stock Exchange to open up its membership to banks.