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‘It is not just about the City, but people far away’

11 October 2013


LAW-MAKERS were "in danger of getting lost in looking at the regulation and forgetting what the regulation is trying to do", the Archbishop of Canterbury told members of the House of Lords this week as they began detailed scrutiny of the Financial Services (Banking Reform) Bill. It was "a question of culture and ethics, not detailed rules", he said.

The chief executive of Barclays, Bob Diamond, had told the Parliamentary Committee on Banking Standards that "culture is what happens when no one is looking," the Archbishop recalled.

"We know what happened when no one was looking in the culture of some parts of the banking industry," he commented. "They fixed LIBOR; over-geared and gamed any system of regulation going. All of that was dealt with under regulatory processes that did not work. They still fixed LIBOR, gamed the system, and did all kinds of other things.

"The force of culture in those institutions made it hard to challenge, and it is very noticeable that over ten years, when this was going on at its worst, the number of people who blew whistles on this was almost zero. The culture made it very hard to discern that what you were doing was not right."

He described the "terrible cost" of the 2008 financial meltdown as a "catastrophe" for "far-flung areas of deprivation and poverty", who "suffered grievous blows of further damage from which they are still in the process not even of looking for recovery.

"The damage when the culture goes wrong is not localised. It is not just about the City: it is about people far away, who know very little about what is going on there, but find that they cannot raise money, that they cannot do their business, and that their banking disappears locally. The vast structures of reform that have been and are being passed through Parliament, including this Bill, and that are passing through the regulators and the industry, show that there is a great failure of trust - and trust will be re-established not by regulation but by culture."

He said that "there is no doubt that we are seeing good things happen in the culture of a number of banking institutions. . . A professional standards body is being set up. I believe that this is not merely temporary self-interest, but, in many cases, a deep sense that there needs to be a change of culture and values."

He was supporting an amendment from the former Chancellor Lord Lawson, providing for greater sanctions for banks that breach new rules designed to keep high-risk activities separate from a bank's core activities.

The Bill should not "encourage behaviour that looks first to what is legal, as has happened for a number of years, and never to ask the question, 'What is right?'" the Archbishop said.

The amendment was withdrawn without a vote. The Bill has completed its passage in the House of Commons, and will return to the Lords for a further Committee Stage debate next Tuesday.


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