Naughtiness or Incompetence?

There is a very unpleasant ripple which is in danger of growing and engulfing the banking-world. One has already seen the first stirrings of Madame Défarge-like blood-lust being directed at the “evil” bankers.

It may be a surprise to many but the “post-meltdown” banking boards still bear a uncanny resemblance to the pre-meltdown ones. Little has changed. There have been NO real adjustments to bankers’ remuneration packages. OK, there have been some grand gestures from some very rich bankers – usually immediately following a half-hearted complaint or exposé by the media. PLUS the banking industry has succeeded in persuading everyone that it really was not their fault but that they were victims of a “Global Economic Downturn”. (Every Treasury Official’s favourite phrase)

The fact is that senior bankers did not make costly mistakes because they were either evil or greedy. They made mistakes because of crass incompetence.

They did not (and still do not) understand what they were doing.

In management there are only two questions to ask if an individual under-performs or performs badly:

Who hired him? Who managed him?

As far as bank Chief Executives are concerned, the buck stops with the Board. They hired and they should have managed. If they hired the wrong person, they should take responsibility . If they hired the right person and then did not manage, then they should all be standing shoulder-to-shoulder in the dock with their protégés.

Question: Would you hire a blacksmith to perform plastic surgery? Would you hire a bus driver to build a rocket?

One of the iconic moments of the whole banking fiasco was he sight of Fred the Shred, Andy (Boots) Hornby and their respective chairmen sitting like a row of fairground ducks in front of the Treasury Select Committee.

These “bankers” who were put through the wringer, Nuremberg-style were an ASDA-trained MBA, a Media man, an Accountant and a Chemist.

What the hell do you expect when you hire individuals who are definitely Not Fit for Purpose? And it is still happening.

Current legislation decrees that those within Financial Services who come into contact with the public have to show a degree of financial competence by studying and passing examinations. They are then registered with the Financial Services Authority.

OK, some of the “examinations” are a bit Janet and John but they do serve a useful purpose.

However, it now appears that those heading-up the Banks continue to be less qualified than those they manage.

Recently, the Chief Executive of the FSA, Hector Sants, tightened his FSA “cilice” yet again by admitting that they (the regulators) had “screwed-up” (his words). Yes they have screwed-up.

Mr Sants had no choice but to own up because it was so blindingly obvious that the gross incompetence of the bank boardrooms has been compounded by the headless-chicken negligence of the FSA. The FSA spends about £400million per year yet it still does not have the manpower experienced or qualified enough to undertand and take-on the high-level machinations of our banks.

That is why many of us are paying 20-30% on our Credit Card balance and Overdraft rates bear an uncanny similarity to those before the Bank Base Rate fell to 0.5%.

If you think of money as a commodity, you may understand:

If you bought five pounds of apples and paid £5, and then a few weeks later, the greengrocer contacted you and said that you owed him another £2 because the price of apples had gone up, you would probably tell him to get lost and you would possibly complain to the Apple Regulator.

Yet the banks will sell you money at certain rate and then keep adding charges at will. The ONLY thing that they have to do is to give you a bit warning. There’s no point in complaining to them and there is very little point in complaining to the regulator (FSA) becuse it can do ABSOLUTELY NOTHNG because the FSA does not have the power to give us, the consumers any real support whatsoever.

For most of our financial problems, the FSA is at best, cosmetic.

The FSA was designed to make sure that when Mrs Smith signed-up for her pension plan, all the boxes were ticked and she was happy with her financial advisor. The FSA is very good at sending its representatives to rifle through the filing cabinets of financial advisors and writing reports. That is a very long way from understanding credit derivatives and the forensic accounting skills needed to understand “written in smoke” bank balance sheets and the Masonic-like relationships and code of silence at the highest levels of the banking industry.

The so-called Tripartite system of regulation, which consists of the FSA, the Treasury and the Bank of England is just what the banks need. In the confusion, they are again getting away with financial murder. Murder of the Economy through not lending the correct amounts at the correct interest rates to the right people.

Make no mistake, the British economy as well as the banking system are currently doing no more than treading water. The politicians are attempting to soothe us with craftily-honed platitudes and promises of imminent economic sunshine.

Never has it been clearer that you get what you (over)pay for.

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