In a news-filled week for journalists, Barclays and several other banks in the UK have been found guilty of rigging a key interbank rate. Politicians and regulators are leading the cry for greater regulation, which history shows us, has failed to check financial fraud. Truth is, everything bankers need to know, they learned in kindergarten. Here are some of those rules, albeit a tweaked version from Robert Fulghum’s essays on kindergarten lessons.
Rule 1: Only good behaviour is rewarded
Imagine for a few minutes that banker pay was not linked to performance but to good behaviour and right conduct. Excessive gambling and risk-taking would vanish and be replaced by a far more conservative approach in which performance would be measured by ethical behaviour.
Rule 2: Share
If bankers had to share their excessive spoils, it would immediately eliminate the desire to play a high-stakes game which rewards risk takers, who get to keep all their goodies. Few bankers will show the same amount of zeal and be in overdrive, if they had to share their bonuses with all the bank staff, especially with the cleaning lady who tidies up after them.
Rule 3: Don’t take things that don’t belong to you
If bankers followed this rule, it would automatically ring-fence the retail operations from the investment banking operations of the bank — something that regulators have pressed for — and keep traders from punting with deposit money or taxpayer bailout money. Bank then would stop behaving like a frenzied hedge fund.
Rule 4: Always colour within the lines
Roughly, this translates into — follow the rules. In banker kingdom it could also mean not conjuring up exotic financial products that are barely understood by those who use it or even those who invent it. If bankers followed this rule, 2008 would have been a different year as would the rest that followed it.
Rule 5: Always tell the truth
If Nick Leeson, the original rogue trader, had disclosed early on to his bank that he had made some very wrong bets, the collapse of Barings could have been avoided. Or what if Jerome Kerveil and more recently Kweku Adoboli had decided to put the truth before their jobs.
Rule 6: Wait for your turn, don’t jump the queue
If only bankers weren’t in such a hurry to seal up every deal and get to the number one spot in everything. If Barclays didn’t want to appear to be at the top of the heap as robust banks go, it may not have rigged key rates lower to appear to be in good nick.
Rule 7: Clean up your mess
Don’t call in the government and public savings for a bail out. Banks deserve to shutter if they have taken bad calls and been imprudent. Getting others to clean the mess builds resentment, just like it would in a classroom.
Rule 8: If you don’t follow the rules, be prepared to stand in the corner and see the headmaster
This is the simplest rule for bankers. The amazing thing about most frauds in the financial services sector is the absolute dismay with which offenders respond, when they are caught. Few rouge traders have turned themselves in for fraud. Most have had to be chased down. This also means that Bob Diamond, the former CEO of Barclays gets little sympathy when he tries to distance himself by saying it was a just “reprehensible” few who were responsible for fixing the London Interbank Overnight Rates. Instead of pointing elsewhere it’s time he stood in the corner.
Anjana Menon is a Delhi-based business writer. You can send your comments to bsshoptalk@gmail.com
