Regular readers know that there is one tried and true way to clean up the 'shoddy' UK banks and that is to require them to provide ultra transparency and disclose on an on-going basis their current asset, liability and off-balance sheet exposure details.
As all financial market participants know, sunlight is the best disinfectant.
It is time to use ultra transparency to disinfect the UK banking system.
Your humble blogger would like to offer his firm's service to coordinate the development and on-going operation of a data warehouse to facilitate shining sunlight into the UK banking system. While the day to day operation of the data warehouse will be run by a large information technology firm, my firm specializes in transforming the data that will be collected into usable information.
Below are excerpts from the Telegraph article.
David Cameron has said that cleaning up Britain’s discredited and “shoddy” banks is a priority for the Government on a par with cutting the country’s debts.If it truly is a priority, I can assure him that should he reach out today, we can begin the process of bringing sunlight to the UK banking system today!
The Prime Minister expressed his anger after the four biggest high street banks — Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland — admitted culpability in the selling of punitive financial products to thousands of small businesses.
Sir Mervyn King, the Governor of the Bank of England, condemned the “shoddy treatment of customers” and “deceitful manipulation” which he said characterised the culture at leading banks....
On Wednesday, Barclays was fined a record £290million after it admitted conspiring to fix global interest rates. The manipulation of the Libor rate is thought to have cost consumers, businesses and investors up to £30 billion.
Today The Daily Telegraph discloses that the fixing of the Libor rate may mean the banks milked the taxpayer for hundreds of millions of pounds as they manipulated the fees they paid for government assistance in 2008 and 2009.Please re-read the cost to the taxpayer of manipulating the Libor rate.
The cost of implementing ultra transparency pales by comparison.
Ed Miliband, the Labour leader, demanded an independent inquiry into the conduct of the banks. Mr Cameron rejected his calls but said it was vital that regulatory and criminal investigations went “wherever the evidence leads” and held those responsible to account “without fear or favour”.Why not have the independent inquiry?
We did not have a Pecora Commission after the beginning of the financial crisis. As a result, the reforms that have been suggested to date would not have prevented the financial crisis, the Libor Scandal nor would they have change the culture of the banking industry.
If you are serious about reform, you have to be serious about investigating the causes of the problem in the first place.
Your humble blogger and Joseph Stiglitz would suggest that at the top of the list for causing the problems the financial system encountered would be opacity.
Opacity both allows the bankers to engage in detrimental activity and allows a culture that thinks bad behavior is acceptable to thrive.
“Dealing with this whole issue is vital for the Government; frankly it is as vital as dealing with the unsustainable debts that we were left by the last government,” he said.
“We know what needs to be done so let’s get on and take those actions. I think the most important thing people want to see is a really concrete set of actions that will help change the culture.”...There is only one concrete action that people believe will change the culture and that is to require the banks to provide ultra transparency.