Gremlins in the works is one thing though but corruption is a different matter.
Last week the Barclays banking group was fined for rigging lending rates. The banks initial response was an apology but now those at the top are finally doing the "honourable" thing and resigning. Yesterday July 2, 2012, Marcus Agius Chariman resigned and today Chief Executive Bob Diamond has followed suit. The matter is far from over though.
Labour leaders Ed Miliiband is pushing for an independent inquiry whilst the Coalition wants an MP based investigation. Tory Chancellor George Osborne claims the second option will be quicker but of course either option will be costly.
So what did the rate rigging involve? Rate rigging occurs when banks lend to each, the Libor, if they manipulate the rates. This action may include products such as interest swaps but when they backfire companies will experience huge losses.
Historically the UK banking system was one of the finest in the world. That all changed when former Conservative PM Margaret Thatcher de-regulated the banking system. As with all other UK de-regulated services standards plummeted and continued to worsen. It would appear they are now at an all time low.
Firstly there were huge salary hikes for those at the top of the banking industry plus sky high bonus payments on top. Public appeals for the UK government to end this culture of greed went unheeded. Promises of reform are yet to come to fruition.
The rate rigging scandal has now blown the lid off the pot. At least four of the major banks were found out to have been rate rigging. The first one was Barclays, one of the UKs biggest banks which was fined £230million. Now it is feared that the Royal Bank of Scotland could also be involved.
The director of RBS Bank Stephen Hester gave up his bonus in view of scandal and investigation. Surely he must have known about it and wouldn't that justify a call for his resignation instead of a bonus? Then again the man is paid £1.2million a year which surely should be more than enough for his work and position without a whopping bonus in addition.
Hester was already under pressure last year to give up his bonus, which he boasts about now. However, the real story is that he waived his £963.000 share deal after the share holders kicked up a storm. After all the bank is owned by the UK taxpayer by 82 per cent, following the government bail-out.
The bank had another bad year ending with a deficit and yet Hester was in line for a £963.000 share deal. Now he may have given that up but, wait a minute, he still got a £785million bonus. It would take Einstein to figure out how a business can run up a deficit and still pay a bonus. Surely even Einstein would be baffled.
In view of all of this will Hester give up his bonus for this year but still receive his shares deal? Again, even if the bank was doing well a salary of £1.2million should be more than sufficient. Any potential bonus and shares deal should be ploughed back into the business to help repay the taxpayer bail-out.
The other banks under investigation are HSBC and Lloyds.
Tags: banking scandal, banking resignations, Brclays rate rigging, Bob Diamond, Marcus Agius, banking bonuses