The crooked cash grab sucking the City dry

The City of London has always been susceptible to corruption. For generations, insider-trading provided incomes for comfortable lives in the Stockbroker Belt on the outskirts of London, but traditional City bankers, who boasted that their word was their bond, seemed above all that. Not any longer. Banks are now run as vehicles for creating large pools of private wealth for their employees. The City is so infected by venality that it is no longer a case of seeking out rotten apples. The barrel is full of them.

The case against the City started with dribs and dabs of bad news that have grown into great piles of it. In 2012, there were embarrassing revelations about money laundering at HSBC and Standard Chartered, which cost them more than £2.5 billion in fines by US regulators.

But the first evidence of institutional corruption also emerged in 2012 in the Libor market that set a globally applicable interest rate for banks. By fixing that rate, a ring of dealers helped each other to increase their profits, not just in the City, but across the world. The evidence for this was sufficiently widespread for the legal authorities in London to take a more critical look at financiers. These men and women had survived the chaos of 2008-09 to which they had contributed without provoking the interest of the law. The Libor scandal changed that. Suspect dealers were not just suspended; they felt the heavy hand of PC Plod on their collars. Some will surely come to trial.

The full extent of the latest evidence of fraud in the foreign exchange market is still to be revealed, but Mark Carney, Governor of the Bank of England, told MPs on the Treasury Committee of the House of Commons on Tuesday that it is “as serious as Libor, if not more so. It goes to the heart of integrity of markets.” The Bank is collecting evidence of long-term collusion among traders at the daily 4pm Forex fix, and the Governor has promised that the perpetrators will be prosecuted to the full extent of the law.

The underlying problem is that investment bankers, in particular, still use their astronomical earnings as their way of keeping the score, and they always want more. Barclays paid 482 bankers more than £1 million last year, up 53 from 2012. Profits were down by 32 per cent, but the bonus pool was up by 10 per cent (pushed hardest by Barclay’s employees in the US).