It’s why, in any civilised society, we need strong lawmakers and regulators who are willing to speak up for those who lack the resources to put the mighty in their place.
The All-Party Parliamentary Group (APPG) on Fair Business Banking is still dealing with the “catastrophic” human consequences of banking misconduct, a decade after some of the major banks had to be bailed out to save the economy from the consequences of their folly. So you might have hoped that the big banks would display empathy and humility when dealing with the victims of mis-selling.
It’s unsurprising that many commentators have reacted with fury to comments made by John McFarlane, the chairman of Barclays, in an interview with the Mail on Sunday. During the interview, Mr McFarlane argued that the payment protection insurance (PPI) scandal has turned many Britons into fraudsters. Mr McFarlane claimed that it was “inconceivable” that all the claims fuelling a “flat-screen television” buying spree were genuine.
Martin Lewis - the founder of Moneysavingexpert.com and a regular columnist for The Yorkshire Post - told the BBC that Mr McFarlane’s comments were “absolutely outrageous”.
“You’d say this is the pot calling the kettle black, but it’s more the cauldron calling the thimble black,’’ he added.
No banker has ever been prosecuted for PPI mis-selling. It is thought the total cost of mis-sold payment protection insurance policies could be a whopping £50bn.
It is, of-course, possible that some compensation claims are not genuine. But the reason the banks have been forced to set aside billions of pounds to settle compensation claims is because they behaved very badly. It’s perhaps surprising that Mr McFarlane didn’t adopt a more contrite tone.
Kevin Hollinrake MP, the co-chairman of the APPG, was so incensed that he fired off a letter of rebuke to Mr McFarlane. The letter should be posted on the noticeboard of every bank in Britain.
As Mr Hollinrake’s letter states, Mr McFarlane’s claim that PPI is turning Britain into a nation of fraudsters ignores a crucial point.
Mr Hollinrake’s letter states: “If the banks had not mis-sold these products in the first instance on such an industrial scale, there would be no need for compensation or, indeed, the opportunity for claims to be lodged.
“To lament, the ‘decline of the City’ due to PPI, ignores the fact that any alleged decline in the City comes as a direct result of the actions of a sector that was out of control, and that relied on misrepresentation to drive unprecedented levels of profit by exploiting an entire nation in order to bolster revenues, bonuses and dividends.”
“It is generally accepted that deregulation precipitated the liquidity crisis that caused the crash of 2008 and in the aftermath, it was the unregulated business banking sector that bore the brunt of the capital raising efforts of large financial institutions .”
Beyond the individual stories of agony caused by banking misconduct, the colossal failures of the banking system have resulted in a loss of confidence in the entire financial services system.
This has had a direct impact on consumer confidence, economic growth and productivity. It’s a shame Mr McFarlane didn’t acknowledge these inconvenient truths.
Struggling to contain his exasperation, Mr Hollinrake’s letter concludes: “We want the City to thrive but to do so, it must stop blaming the victims and start to take responsibility for both the liquidity and conduct crises we have seen over the last decade.”
The mis-selling scandals, including PPI, caused misery and eroded faith in a sector that was once renowned for its probity. Mr McFarlane is entitled to believe that a large number of PPI claims are fraudulent. But where is the evidence to support this claim?
Wouldn’t his time have been better spent explaining how the flawed culture that led to PPI mis-selling has been eradicated by the banks? The banking sector must stop trying to shift the blame for its failings and take a long hard look in the mirror.