November 6th, 2012
By Gordon Neave
Picture: The Economist
During the late 1980s and early 1990s British bankers changed for the worse. Having spent most of the past three centuries as financial herbivores — solid, reliable and rational members of the community — they metamorphosed into wild, hungry carnivores. Fuelled by commissions, bonuses and greed, they started seeing their customers as fair game.
Once respectable institutions were transformed into globally ambitious financial supermarkets whose business models revolved around selling as many financial products and services — including stockbroking, pensions, insurance, mortgages, and estate agency — as they could to as many customers as possible. Rent gouging corporates and gambling on complex financial instruments that few of the bankers actually understood added to the chimera of success.
The new model banksters turned away from any notion of service, seeking instead to exploit the gullibility of both customers and shareholders. They may not have realised it at the time, but they were massively squandering an inheritance built up over three centuries of caution, prudence, diligence and integrity by many generations of predecessors.
In this new sales-driven environment, spivvish salesmen were revered and rewarded to the hilt, while old-fashioned herbivorous bankers were derided, under-rewarded and pushed out with the carrot of “early retirement”. Their places were taken by baying hoards of cheaper, younger and more biddable carnivores who had little appetite for vegetarian fare like morality or ethics.
Many of these newcomers were given grand-sounding titles such as ‘relationship manager’, which basically meant they were told to ensure customer complaints fell on deaf ears. Others were styled “customer care managers”, and given the role of advising cheated and abused customers that they had two choices: drop their complaints or refer them to the supposedly ‘independent’ (but actually 100% partisan) Financial Ombudsman Service.
As ethical standards went through the floor, and as the principles of the Banking Code, FSA and CIOBS were breached with impunity, the banks’ management — carnivore class — became ever more arrogant and remote from their customers. By the mid-2000s, they were running their banks on remote control, letting the robotic and unethical carnivores do their dirty work, with the wholesale massacre of the UK’s mid corporates and small and medium-sized enterprises seen as a necessary by-product of their institutions’ success.
Junior carnivores were seemingly pre-programmed to be deaf to customers’ requirements; blind to the collateral damage they are inflicting on the wider economy; and dumb to the extent that they routinely either ignore or fail to respond to correspondence from customers. The Treasury, Bank of England and Financial Services Authority are complicit in this dire situation, as their monetary easing programmes (coupled with their desire to cover-up their past failures) have underpinned the modern banksters’ conceit that they remain bankers when they are in fact bonus-driven debt collectors devoid of vision or consideration for their customers’ needs.
The fact that only three senior bankers have paid any price for their banks’ pre-crash shenanigans and malfeasance — RBS’s Johnny Cameron (banned from senior financial sector roles), HBOS’s Peter Cummings (banned from senior financial sector roles and fined £500,000) and RBS’s Fred Goodwin (merely stripped of his knighthood) — is testimony to the uselessness and complicity of the UK regulatory establishment. The absence of any punishment for the sins of the past had led next generation of carnivorous banksters to assume that they too will be above the law.
But there is an antidote to Mad Banker Disease: a tsunami of damages claims — many of which relate to the so-called ‘misselling’ of interest rate swaps and the rigging of the Libor interbank borrowing rate — is currently in preparation and about to hit the courts. It is widely expected to have a similar effect on the banking elite as the First World War had on the aristocracy of the time.
This article was written by Gordon Neave, chief executive of the Edinburgh-based property asset managers Laurie Neave. He can be contacted via email at email@example.com