Second opinion: The impact of banking scandal and what now?
I suspect there is a lot we have yet to discover about the bank rate-fixing scandal – but one thing we may never know is the true cost to small businesses.
Did manipulating the rate make it more expensive for firms to borrow, increasing their costs? Did higher rates put businesses off investing?
These have a colossal impact on small and medium-size enterprises (SMEs) because so many rely on bank funding.
What matters to small firms matters to Britain because successful small firms mean jobs.
Business Cards From Only £10.95 Delivered www.myprint-247.co.ukView details
Our heavyweight cards have FREE UV silk coating, FREE next day delivery & VAT included. Choose from 1000's of pre-designed templates or upload your own artwork. Orders dispatched within 24hrs.
Terms: Visit our site for more products: Business Cards, Compliment Slips, Letterheads, Leaflets, Postcards, Posters & much more. All items are free next day delivery. www.myprint-247.co.uk
Contact: 01858 468192
Valid until: Wednesday, May 22 2013
Far too many companies have gone out of business because the banks pulled the rug from under them.
Now, even more are at risk because they can't borrow the money they need.
Money is being released into the economy but it's sitting on the banks' balance sheets.
Everything confirms that the opprobrium heaped on the bankers has been deserved.
The regulatory system is unfit for purpose and the Government does not seem to have a workable answer to unfreezing liquidity for small businesses.
Bankers thought they could manipulate the Libor rate, something we all thought was a level playing field. This followed the scandalous miss-selling of high-risk loan hedge agreements to small businesses and private investors who didn't have a clue what they were buying and ended up losing money and in some cases their livelihoods.
So where do we go from here?
Let's start with criminal prosecutions.
Next, we need a fundamental change to the way bankers are paid.
Over the past 10 years, bank shareholders, including our pension funds, have lost money while the people working in the investments arms milked them for millions. It's obscene.
Let's offer people who work in banks a good salary, a modest bonus and tightly controlled compliance.
Perhaps then banks will just attract people who can do the job honestly.
If the current crop don't want to work in banks for those kinds of rewards, then they can go.
We also need to enact banking legislation to curb dangerous speculation, just as they did in 1930s America in the aftermath of the Wall Street crash.
This sorry mess reveals the uselessness of the regulatory system. What is the Bank of England going to do?
We now find out bank rate fixing was flagged up in 2008. Clearly, the regulators were not on the ball and the Vickers recommendations have even been watered down.
It will be interesting to see what the politicians, the Financial Services Authority and the Crown Prosecution Service do.
More bankers' heads will roll but that should just be for starters.
Arnab Dutt is managing director of Texane, of Welland Business Park, in Market Harborough, which makes polyurethane components.