Barclays is being punished for being first, not worst

Barclays came clean while others are still hiding manipulation.

One thing that has come through in Barclays' counter-offensive over Libor-fixing is that it genuinely believes that what it was doing, if not actually ethical, was at least no worse than that which every other bank was doing.

In its submission to parliament, it writes of itself that:

The bank’s exceptional level of cooperation was expressly recorded by each of the Authorities, and was described by the DoJ as "extraordinary and extensive, in terms of the quality and types of information provided" and "the nature and value of Barclays cooperation has exceeded what other entities have provided in the course of this investigation." That cooperation has led to Barclays being the first to reach resolution of these issues. It ironic that there has been such an intense focus on Barclays alone, caused by our being first to settle in the midst of an industry-wide, global investigation.

Similarly, in Bob Diamond's record of his phone call with the Bank of England's Paul Tucker, we learn (as well as the fact that Diamond goes by RED, for Robert Edward Diamond, in internal memos) that Barclays genuninely believed the reality of Libor was that:

Not all banks were providing quotes at levels that represented real transactions.

This belief – that other banks have been manipulating Libor as well – is not some desperate attempt by Barclays to divert attention. We already know that RBS had to fire at least four, and possibly as many as ten, traders over Libor manipulation, and it seems likely that many other banks were doing the same thing. Indeed, if Barclays are to be believed, the only reason the call with Tucker happened at all was because they were manipulating Libor less than the other banks. This chart, via Reuter's Jamie McGreever, shows Barclay's spread over the Libor rate:

Notice the spike in Barclays' borrowing costs in September 2008, settling down almost entirely by December of that year. The Bank of England apparently thought that was because the market considered Barclays to be riskier than most banks; Barclays believed it to be because the other banks were lying more than it was. (The answer, of course, is likely somewhere in the middle.)

It may still be true that Barclays was qualitatively worse. There is no hint – yet – that the lies from RBS went any higher than trader level, whereas Barclays' Chief Operating Officer resigned yesterday as it became apparent that he may have directly ordered subordinates to under-report Libor rates, based on a mis-understanding of Tucker's phone call.

But it is undoubtedly the case that the reason Barclays is getting the most trouble – the reason why all subsequent investigation has focused on them, and they have had two waves of high-profile resignations – is because they were the first to be fingered. And they were only first because they held their hands up and admitted culpability. The authorities are, after all, still investigating other banks.

It may well turn out that what Barclays was doing was in no way unique. Now, if that results in the CEOs of all major banks being hounded out and potentially prosecuted for their actions in the run-up and immediate aftermath of the financial crisis, then it's been a long time coming. But it seems far more likely that what will happen is that by the third or fourth bank, the excuse that "everyone was doing it" will start to hold water. The failure will be seen as systematic, and worthy of investigation, but not of any extra punishment beyond the reforms which will be suggested then half-heartedly implemented on the industry. The chief executives who participated in cover-ups will get off.

What lesson does this teach banks and businesses in the future? Do not co-operate. Do not reveal anything to the authorities. If you hold your hands up and admit blame, you will be pilloried, but if you bury your wrongdoings until someone else is found out, you'll get away scott-free.

That doesn't seem to be the best idea.

Barclays bank, being punished worst for coming clean first. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The Brexit Beartraps, #2: Could dropping out of the open skies agreement cancel your holiday?

Flying to Europe is about to get a lot more difficult.

So what is it this time, eh? Brexit is going to wipe out every banana planet on the entire planet? Brexit will get the Last Night of the Proms cancelled? Brexit will bring about World War Three?

To be honest, I think we’re pretty well covered already on that last score, but no, this week it’s nothing so terrifying. It’s just that Brexit might get your holiday cancelled.

What are you blithering about now?

Well, only if you want to holiday in Europe, I suppose. If you’re going to Blackpool you’ll be fine. Or Pakistan, according to some people...

You’re making this up.

I’m honestly not, though we can’t entirely rule out the possibility somebody is. Last month Michael O’Leary, the Ryanair boss who attracts headlines the way certain other things attract flies, warned that, “There is a real prospect... that there are going to be no flights between the UK and Europe for a period of weeks, months beyond March 2019... We will be cancelling people’s holidays for summer of 2019.”

He’s just trying to block Brexit, the bloody saboteur.

Well, yes, he’s been quite explicit about that, and says we should just ignore the referendum result. Honestly, he’s so Remainiac he makes me look like Dan Hannan.

But he’s not wrong that there are issues: please fasten your seatbelt, and brace yourself for some turbulence.

Not so long ago, aviation was a very national sort of a business: many of the big airports were owned by nation states, and the airline industry was dominated by the state-backed national flag carriers (British Airways, Air France and so on). Since governments set airline regulations too, that meant those airlines were given all sorts of competitive advantages in their own country, and pretty much everyone faced barriers to entry in others. 

The EU changed all that. Since 1994, the European Single Aviation Market (ESAM) has allowed free movement of people and cargo; established common rules over safety, security, the environment and so on; and ensured fair competition between European airlines. It also means that an AOC – an Air Operator Certificate, the bit of paper an airline needs to fly – from any European country would be enough to operate in all of them. 

Do we really need all these acronyms?

No, alas, we need more of them. There’s also ECAA, the European Common Aviation Area – that’s the area ESAM covers; basically, ESAM is the aviation bit of the single market, and ECAA the aviation bit of the European Economic Area, or EEA. Then there’s ESAA, the European Aviation Safety Agency, which regulates, well, you can probably guess what it regulates to be honest.

All this may sound a bit dry-

It is.

-it is a bit dry, yes. But it’s also the thing that made it much easier to travel around Europe. It made the European aviation industry much more competitive, which is where the whole cheap flights thing came from.

In a speech last December, Andrew Haines, the boss of Britain’s Civil Aviation Authority said that, since 2000, the number of destinations served from UK airports has doubled; since 1993, fares have dropped by a third. Which is brilliant.

Brexit, though, means we’re probably going to have to pull out of these arrangements.

Stop talking Britain down.

Don’t tell me, tell Brexit secretary David Davis. To monitor and enforce all these international agreements, you need an international court system. That’s the European Court of Justice, which ministers have repeatedly made clear that we’re leaving.

So: last March, when Davis was asked by a select committee whether the open skies system would persist, he replied: “One would presume that would not apply to us” – although he promised he’d fight for a successor, which is very reassuring. 

We can always holiday elsewhere. 

Perhaps you can – O’Leary also claimed (I’m still not making this up) that a senior Brexit minister had told him that lost European airline traffic could be made up for through a bilateral agreement with Pakistan. Which seems a bit optimistic to me, but what do I know.

Intercontinental flights are still likely to be more difficult, though. Since 2007, flights between Europe and the US have operated under a separate open skies agreement, and leaving the EU means we’re we’re about to fall out of that, too.  

Surely we’ll just revert to whatever rules there were before.

Apparently not. Airlines for America – a trade body for... well, you can probably guess that, too – has pointed out that, if we do, there are no historic rules to fall back on: there’s no aviation equivalent of the WTO.

The claim that flights are going to just stop is definitely a worst case scenario: in practice, we can probably negotiate a bunch of new agreements. But we’re already negotiating a lot of other things, and we’re on a deadline, so we’re tight for time.

In fact, we’re really tight for time. Airlines for America has also argued that – because so many tickets are sold a year or more in advance – airlines really need a new deal in place by March 2018, if they’re to have faith they can keep flying. So it’s asking for aviation to be prioritised in negotiations.

The only problem is, we can’t negotiate anything else until the EU decides we’ve made enough progress on the divorce bill and the rights of EU nationals. And the clock’s ticking.

This is just remoaning. Brexit will set us free.

A little bit, maybe. CAA’s Haines has also said he believes “talk of significant retrenchment is very much over-stated, and Brexit offers potential opportunities in other areas”. Falling out of Europe means falling out of European ownership rules, so itcould bring foreign capital into the UK aviation industry (assuming anyone still wants to invest, of course). It would also mean more flexibility on “slot rules”, by which airports have to hand out landing times, and which are I gather a source of some contention at the moment.

But Haines also pointed out that the UK has been one of the most influential contributors to European aviation regulations: leaving the European system will mean we lose that influence. And let’s not forget that it was European law that gave passengers the right to redress when things go wrong: if you’ve ever had a refund after long delays, you’ve got the EU to thank.

So: the planes may not stop flying. But the UK will have less influence over the future of aviation; passengers might have fewer consumer rights; and while it’s not clear that Brexit will mean vastly fewer flights, it’s hard to see how it will mean more, so between that and the slide in sterling, prices are likely to rise, too.

It’s not that Brexit is inevitably going to mean disaster. It’s just that it’ll take a lot of effort for very little obvious reward. Which is becoming something of a theme.

Still, we’ll be free of those bureaucrats at the ECJ, won’t be?

This’ll be a great comfort when we’re all holidaying in Grimsby.

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Brexit. You can find him on Twitter or Facebook.