On 8 May the BBC2 broadcast the first in its three part series Bankers: Fixing the System. This series seeks to explore what went wrong with our banking sector and how we fix it.
The transformation of banks from prudent, conservative organisations to risk takers has been covered in significant depth in the past. However the programme took quite an interesting take on this subject. There is a paradox at the heart of the banking sector. Banks are utility providers and stabilisers as well as profit making businesses. For our economy to flourish, so must the banks. To be financially successful and provide solidity the banks must balance their stabilising and profit generating functions. But ultimately, to be successful they must take risks as businesses do.
The programme suggested that a line had been crossed in their approach to striking this balance. The focus shifted from “how much money can we make for our customers” to “how much money can we make from them”. In the case of the Libor scandal this resulted in outright dishonesty as rates were fixed and notions of “free-market discipline” were abandoned.
Somewhat controversially the programme took the view that it was the Libor scandal that “crystallised” the public’s opinion of the banks as organisations in the UK that had gone culturally very wrong. The programme went as far to suggest that the industry has been “let off” for the wider banking crisis on the grounds that it was a global phenomenon.
I do not agree with this analysis. It was a shame that the programme did not explore the disastrous consequences of this change in culture and how it has filtered down to the bank’s day to day dealings with their customers In the form of broken agreements and the miss-selling of derivatives, long before the crash and revelations about Libor. Trust and confidence has been lost at bank manager as we well as chief executive level.
In our post credit crunch world the very idea of banks making a profit and being successful is unpalatable to some. Future episodes will focus on how we break the cycle of scandal and “banker bashing” and rehabilitate the sector so it successfully fulfills its dual role. We will be watching the next two episodes with interest.