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Learn from Australia—UK needs in-depth inquiry into banking crimes

Learn from Australia—UK needs in-depth inquiry into banking crimes

A decade on from the 2008 financial crash, which required a UK government bank bailout that eventually cost £1.2 trillion, the City of London is still the centre of the worst financial practices that caused the crash, but there has not been a proper inquiry into Britain’s banks.

Citizens Electoral Council of Australia
Media Release Tuesday, 18 September 2018
Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Website: http://www.cecaust.com.au

Learn from Australia—UK needs in-depth inquiry into banking crimes

A decade on from the 2008 financial crash, which required a UK government bank bailout that eventually cost £1.2 trillion, the City of London is still the centre of the worst financial practices that caused the crash, but there has not been a proper inquiry into Britain’s banks.

This is an enormous cover-up, which the British public should not tolerate.

The potential scale of the criminality in the UK banking system can be gauged by comparing Britain’s banks to Australia’s. Whereas Britain’s banks were at the centre of the global crisis, and up to their eyeballs in money laundering and market-rigging scandals, Australia’s banks were considered the best in the world—they supposedly avoided the global financial crash, and were thought to have the world’s best regulation.

That has all changed, however, since the Australian government in November 2017 caved in to public pressure and appointed a royal commission into financial services. To limit the inquiry and protect the banks, the government sought to hobble the royal commission with terms of reference approved by the banks themselves; the banks’ influence can be seen in the opening of the Letters Patent establishing the inquiry, which states: “Whereas Australia has one of the strongest and most stable banking, superannuation and financial services industries in the world, which performs a critical role in underpinning the Australian economy. And Australia’s banking system is systemically strong with internationally recognised and world’s best prudential oversight and regulation.”

Those words now read like the fatal promotion of the Titanic as “unsinkable”. Just the first fortnight of public hearings of that royal commission was enough to shred the banks’ image, and subsequent rounds of public hearings have added to the evidence against them. Australia’s major banks now stand exposed as cesspools of criminality, involved in mortgage control fraud, predatory financial advice, asset stripping, and stealing through hidden fees and charges, including from dead people.

If this is the case for Australia’s banks, what would a proper inquiry into British banks find?

It is a scandal that there has not been such an inquiry, despite the UK banks’ myriad failings and crimes. Here is just a sample of what is known about the banks:

• they were in the thick of the reckless practices that caused the 2008 crash, in response to which the UK government initiated a massive rescue program which included the nationalisation of Northern Rock, HBOS and RBS;

• the City of London was and still is the centre of the trade in derivatives, the toxic financial gambling instruments that hid the risks and fraud inherent in the sub-prime lending frenzy—the most dangerous of these derivatives trades, credit default swaps, were made by AIG’s London subsidiary, AIGFP; 

• multiple City banks were involved in rigging the LIBOR benchmark interest rate, and the foreign exchange (forex) market;

• predatory banks have snared UK councils in derivatives deals called LOBO (Lender Option Borrower Option) loans, which loot the councils of their revenue, forcing austerity on crucial local services;

• HSBC, the UK’s biggest bank, is a massive criminal enterprise, deep into money laundering for drug cartels and terrorist organisations, and tax evasion, but protected at the highest levels of the British establishment;

• while majority-owned by UK taxpayers, RBS nevertheless aggressively exploited its customers, most notoriously through its Global Restructuring Group unit, which forced thousands of solvent small businesses into bankruptcy;

• the City of London is at the centre of the global web of “offshore” jurisdictions, the majority of which are British Crown dependencies and overseas territories, which is the world’s infrastructure for tax evasion, money laundering, and organised crime.

The only significant inquiry into Britain’s banking system was Sir John Vickers’ 2010-11 Independent Commission on Banking; however, Vickers looked into the banks’ structure, not their practices.

The Financial Conduct Authority (FCA), which is supposed to police the banks’ conduct, in December 2015 closed down a review of British banking culture that had only been under way for a few months. The 31 December Financial Times said it was the latest sign that years of “banker bashing” were coming to an end. Then Chancellor of the Exchequer George Osborne, who in 2011 had lobbied the Obama administration not to bring criminal charges against HSBC for its money laundering, was understood to be behind the FCA’s decision.

Glass-Steagall

British banks are nervous about Australia’s inquiry. Back on 2 May Rupert Murdoch’s London Times expressed this fear in “UK lenders should scent danger from Australian banking’s dirty secrets”.

Katherine Griffiths wrote: “The affair has sent shockwaves as far as Britain, where Australia has been hailed for coming through the financial crisis relatively unscathed and where its bankers and regulators were seen as holding the secret to doing business profitably but sensibly. … In Australia, it is possible that the commission will take things one step further, by demanding a break-up of the country’s big banks in an attempt to enforce better behaviour and improve competition. That would be something for the UK’s large lenders to worry about, because even though the reputation of Australia’s financial system has been tarnished, it is a precedent that could capture the imagination of banking critics the world over.” (Emphasis added.)

And there’s the rub. The lesson from the 2008 crash was that the integration of traditional commercial banking with investment banking, as a result of the 1986 Big Bang deregulation of the City of London and the 1999 repeal of the USA’s Glass-Steagall Act, had led to too-big-to-fail banks and an explosion of dangerous financial speculation. The banks have blocked every attempt to restore this sensible separation, desperate to maintain the structure whereby the public’s deposits are collateral for their gambling. (Sir John Vickers’ “ring fence” of Britain’s banks is not a proper separation, and therefore will be able to be gamed.) But a proper inquiry would prove that the banks have no credibility, as it has in Australia, and that only structural separation will end the conflicts of interests that enable them to exploit their customers, and stop them from gambling with their depositors’ funds.

Click here for a free DVD of two presentations from the CEC’s 30 June seminar in Perth: the BFCSA’s Denise Brailey on Mortgage Fraud Explained, and Australian Alert Service editor Elisa Barwick on China’s Glass-Steagall standard. on China’s Glass-Steagall standard. 

Click here to join the CEC as a member.

Click here to refer others to receive regular email updates from the Citizens Electoral Council of Australia.

Last modified onTuesday, 18 September 2018 21:06

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