Ambrose Bierce once defined hypocrisy as “prejudice with a halo”. (He also defined “corporation” as “an ingenious device for obtaining profit without responsibility”.) He must have been thinking of Barclays bank and its CEO, Bob Diamond, who, in return for remuneration totalling £100m, presided over the fiddling of the LIBOR rate. Last year the BBC (on whose Executive Board Diamond’s boss, Marcus Agius, sits) invited him to give the quaintly-named Today Business Lecture 2011, in which he said, in part:
It’s a very personal thing, but throughout my career – from my time as a teacher, to my time as a banker – I have seen just how important culture is to successful organisations.
Culture is difficult to define, I think it’s even more difficult to mandate – but for me the evidence of culture is how people behave when no-one is watching.
Our culture must be one where the interests of customers and clients are at the very heart of every decision we make; where we all act with trust and integrity.
But it’s not just about how we behave towards our customers and clients. It’s also about how we work together with our colleagues, because if you have to deliver for customers with 150,000 colleagues around the world, as we do, you better be able to work as a team.
As far as I’m concerned, if you can’t work well with your colleagues, with trust and integrity, you can’t be on the team.
Culture truly helps define an organisation.
You know what? He’s dead right. And the culture of the banking industry stinks to high heaven — as the Bank of England Governor, Mervyn King, pointed out with admirable clarity yesterday.
And less you think that it is only a few bad apples like Barclays and RBS that are bringing an otherwise admirable industry into disrepute, spare a thought for the industry’s trade organisation, the British Bankers Association, which on Thursday issued a statement saying that
“The British Bankers’ Association is shocked by yesterday’s report about LIBOR. The banks which contribute to the LIBOR rate must meet the necessary obligations to their regulators. The BBA has proactively co-operated with the authorities at every stage and will continue to work with the regulatory investigations into LIBOR, submitting information and making staff available for interview.
The strange thing about this is that the BBA owns LIBOR and is nominally responsible for it. But the minute the scandal broke, the BBA raced to disown that responsibility. The organisation’s Chief Exec is an ice-queen named Angela Knight. Whenever anything goes wrong, up she pops on the mainstream media explaining in frosty terms that it’s nothing to do with the bankers. But even she is now struggling to escape the implications of what her members have been up to.
Here she is on Channel 4 News, for example, being interviewed by Jon Snow:
We turn now to an admirable analysis of the BBA’s hypocrisy by Cathy Newman of Channel 4 News. She starts by sketching the historical background:
Questions about Libor had actually been raised as far back as November 2007 at a Bank of England meeting with bank chiefs, and it seemed clear to everyone at the time that it was the BBA that was responsible for putting its house in order.
BBA spokesman John Ewan said the trade group was already monitoring the situation in early 2008 and would bring forward an internal review, saying: “We want to ensure that our rates are as accurate as possible, so we are closely watching the rates banks contribute.”
And no wonder. By now independent economists had begun to come up with analysis that showed there was evidence of jiggery-pokery.
What was the BBA doing during this period?
On 17 April 2008 a spokesman said the association was conducting a review of Libor and working closely with the Bank of England on the matter.
He added that the BBA would strictly enforce the rules and remove banks who had submitted inaccurate figures from the panel of 16. But there was no independent oversight: the review would be carried internally by BBA investigators who would remain anonymous.
In May of that year Mr Ewan said he had interviewed banks, hedge funds and academics as part of the review.
The BBA initially said it would not be making any major changes to the Libor system, then suddenly hinted that it would increase the panel of banks reporting their borrowing costs in the biggest shake-up for a decade, saying: “The changes will boost the confidence of its many users.”
But two months later there was another change of heart, with the BBA rejecting several radical proposals designed to ensure accuracy. The panel of 16 would remain unchanged.
But the association did promise to improve its scrutiny of the rates submitted by banks. Banks’ input would be “actively monitored every day” and a BBA committee would meet every month to review questionable quotes.
Despite these assurances, in September 2008 accusations of inaccuracy flared up again after analysts noticed that borrowing rates for a US Federal Reserve auction were much higher than Libor, in defiance of all market logic.
BBA spokeswoman Lesley McLeod insisted: “Libor is accurate. It is constantly monitored and currently reflects the extreme market volatility present in these unprecedented circumstances.”
So what are we to conclude about Ms Knight’s sordid little trade organisation?
When suggestions of rate-rigging first surfaced years ago, along with widespread suspicion among bankers and academics, the BBA made no attempt to shift the blame to others.
The association clearly knew about market misgivings about the veracity of the Libor rates as early as November 2007.
Throughout 2008 the BBA promised investors it was monitoring the information supplied by banks closely. There were no revelations of wrongdoing – and no suggestion that it was anyone else’s responsibility to supervise Libor.
The trade body promised to monitor the situation on a daily basis, but failed to undercover wrongdoing that we now know was rife at Barclays.
Given all that, the BBA’s claim to be “shocked” at the report into wrongdoing at Barclays looks like the kind of thing that gives hypocrisy a bad name.