The end of the “Banking Bashing”

Bob Diamond, the former head of Barclays, was three years ahead of his time. In January 2011, Diamond told the parliamentary committee in England that the “period of remorse and apology needs to be over.” This caused a major disruption amongst those in the committee. As a result, many politicians criticized him as being arrogant and out of touch. Within 18 months of that comment, he had been forced out of his job. Despite the chaos that has occurred over the Financial Conduct Authority’s (FCA) notice of a life insurance inquiry, one message has materialized within the past week: the United Kingdom government and public opinion have shifted. Bankers’ remorse over the global financial crisis may actually be over.

This statement is so true that the regulators have been in the dock as of recent. The FCA has been expressing their concern over its potential effect on the London market and thus, categorizing it as an “egregious error.” When the FCA was created from the defunct Financial Services Authority one year ago, the viewpoint brought by the financiers was held in good regard. However, the regulators are now being accused of the exact same crime. Authorities in Asia, Europe, the United States and the United Kingdom continued to pursue all of the wrongdoings that occurred prior to the financial crisis but began to slow. Record-setting fines have been incurred in the United States and Europe for these offenses. The United Kingdom’s fine for the payment protection insurance scandal was GBP 22 billion. In the Libor interest rate transgression a string of banks have been identified but not yet punished. The largest misbehavior of all, the change of global foreign exchange rates, has not yet been completely exploited.
Meanwhile, many bankers report the decline of regulatory fervor. Many of those who have previously investigated the Libor scandal and now convinced that the offense is not being prioritized, especially in the United States. Others state that the exploratory staff in the United States and Europe has diverted their attentions to forex accusations. However, it is no coincidence that the real mood swings are occurring amongst the politicians, especially in the United Kingdom. With almost one year to go for the May 2015 general election, the British government is restless in sparking economic growth within the country. Since the financial services industry plays a critical role in the economic boost of the United Kingdom, as a straight producer of tax revenue and GDP as well as a provider of capital, the City is critical.
While the FCA insurance analysis response highlighted a shift in the government’s option toward the City and away from the regulators, bankers do not yet feel respected. However, for insurers, the assault on the FCA was pivotal to the future investment plans of the government’s infrastructure. Politics and the upcoming elections appear as if they are going to create an increasingly benevolent environment within Europe. Although the outbound commissioner Michel Barnier has been bragging about his future structural improvements for the banks, the overall viewpoint is that he needs to step aside. With a new set of technocrats that will soon be appointed in the European Union and a new European Parliament, the momentum for enforcement has likely been eliminated.
At the same time, none of this adds to a revolution. Although the initial signs of the crisis emerged in the United States seven years ago, there is a significant amount of clean-up work that must be accomplished but sensible regulators continue to be aggressive. The wider mood swing is tangible as financiers do not protest “banker bashing.” Many have even started admitting their profession in social situations. This change has raised red flags and is becoming of major concern amongst the wary policy makers. Poor banking previously prospered due to a weak environment that allowed for light-touch regulation resulting in chaotic markets. The world does not need to forget this point. However, Bob Diamond, who recently stepped back into the banking business, will not be involved in the changing tone amongst western legislature. He is bolstering the African venture by recently purchasing Botswana-based BancABC.

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