Libor: what about the regulators?

More light needs to be shone on the FSA.

It’s hard to know who to point the finger at when it comes to the Barclays’ culture of deceit. While most are simply blaming the bankers, Ann Pettifor, for one, blames the economists. Others, meanwhile, are blaming the regulators. 

One should probably blame all three (not to mention politicians), but if an enquiry is to be pursued, more light certainly needs to be shone on the regulators. The Times yesterday implicates the Bank of England in the Libor scandal, suggesting they may have not only condoned the system of manipulation but actively encouraged it. From our experience this doesn’t appear to be at all far-fetched.

Looking into the role of the finance sector in commodity speculation, we became increasingly disturbed by the lax approach adopted by the FSA. When we dug deeper, we found that the FSA was lobbying the European Union on behalf of the City, to prevent effective regulation of speculation by Brussels. 

As the FSA is paid for by the City, almost entirely governed by the City or ex-City bankers, and with virtually no transparency, its weak approach to Barclays’ failings should come as no surprise. This is in stark contrast to US authorities, who imposed fines on Barclays almost 4 times greater than those levied by the FSA.

Barclays has been at the heart of commodity speculation activity AND at the heart of fighting off any regulation. A letter to the Commodities Futures Trading Commision in the US, urges a light touch approach.  However WDM research has exposed Barclays as the biggest UK bank involved in speculation in the commodity derivative markets, which has contributed to price spikes such as those in 2008 and 2011 which pushed millions into hunger and deeper poverty. While the bank claimed under pressure at its 2012 AGM that it only facilitated deals for third parties, the reality is a little more complex, with Barclays' risk-taking approach to dealing suggesting that it effectively speculates itself. They state of the Barclays Capital’s Commodities division that “Our Commodities Traders build ‘trading books’ specialising in goods from energy products to agricultural assets, all over the world.”  

As we gear up for a new regulatory model under the aegis of the Bank of England, we have to question about the direction. And we have to ask questions about the relationship between the regulators and Barclays in particular. Now that more evidence has come to light of the failings of the regulators, and their incestuous relationship with the banks they’re meant to oversee, nothing short of a complete overhaul of the banking and regulatory system will suffice.

The numbers:


  • Fines imposed by the FSA: £59m
  • Fines imposed by US Authorities: £230m
  • Earnings from speculation on commodity derivatives: £189m/year
  • Statement from Bob Diamond at the Barclays AGM: “our traders are not involved in direct speculation.”


Board of Directors:

  • 26 of 36 members of the board linked to the Finance sector since 2000 before or after appointment
  • 9 continued to hold appointments in financial corporations while at the FSA
  • Board Directors linked to consumers or other stakeholder: 1

Meetings held with the finance sector about European Markets in Financial Instruments Directive

  • 87 per cent of all meetings held with industry bodies
  • Only 1 meeting held with a third party stakeholder

Deborah Doane is the director of the World Development Movement

FSA. Photograph, Getty Images.
Photo: Getty Images
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Autumn Statement 2015: How should Labour respond?

The government always gets a boost out of big setpieces. But elections are won over months not days. 

Three days in the political calendar are utterly frustrating for Her Majesty’s Loyal Opposition – the Queen’s Speech, the Budget and the Autumn Statement. No matter how unpopular the government is – and however good you are as an opposition - this day is theirs. The government will dominate the headlines. And played well they will carry the preceding with pre-briefed good news too. You just have to accept that, but without giving in or giving up.

It is a cliche that politics is a marathon not a sprint, but like most cliches that observation is founded in truth. So, how best to respond on the days you can’t win? Go to the fundamentals. And do the thing that oddly is far too little done in responses to budgets or autumn statements – follow the money.

No choices in politics are perfect - they are always trade offs. The art is in balancing compromises not abolishing them. The politics and the values are expressed in the choices that you make in prioritising. This is particularly true in budgets where resources are allocated across geographies - between towns, cities and regions, across time - short term or long term, and across the generations - between young and old. To govern is to choose. And the choices reveal. They show the kind of country the government want to create - and that should be the starting point for the opposition. What kind of Britain will we be in five, ten, fifteen years as these decisions have their ultimate, cumulative impact?

Well we know, we are already living in the early days of it. The Conservative government is creating a country in which there are wealthy pensioners living in large homes they won, while young people who are burdened with debts cannot afford to buy a home. One in which health spending is protected - albeit to a level a third below that of France or Germany – while social care, in an ageing society, is becoming residualised. One where under-regulated private landlords have to fill the gap in the rented market caused by the destruction of the social housing sector.

But description, though, is not sufficient. It is only the foundation of a critique - one that will succeed only if it describes not only the Britain the Tories are building but also the better one that Labour would deliver. Not prosaically in the form of a Labour programme, but inspirationally as the Labour promise.

All criticism of the government – big and little – has to return to this foundational narrative. It should connect everything. And it is on this story that you can anchor an effective response to George Osborne. Whatever the sparklers on the day or the details in the accompanying budgetary documentation, the trajectory is set. The government know where they are going. So do informed commentators. A smart opposition should too. The only people in the dark are the voters. They feel a pinch point here, a cut there, an unease and unfairness everywhere – but they can’t sum it up in words. That is the job of the party that wants to form a government – describing in crisp, consistent and understandable terms what is happening.

There are two traps on the day. The first is narrowcasting - telling the story that pleases you and your closest supporters. In that one the buzzwords are "privatisation" and "austerity". It is the opposite of persuasion aimed, as it is, at insiders. The second is to be dazzled by the big announcements of the day. Labour has fallen down here badly recently. It was obvious on Budget Day that a rise in the minimum wage could not compensate for £12bn of tax credit cuts. The IFS and the Resolution Foundation knew that. So did any adult who could do arithmetic and understood the distributional impact of the National Minimum Wage. It could and should have been Labour that led the charge, but frontbenchers and backbenchers alike were transfixed by the apparent appropriation of the Living Wage. A spot of cynicism always comes in handy. In politics as in life, if something seems to be too good to be true then … it is too good to be true.

The devil may be in the detail, but the error is in the principle – that can be nailed on the day. Not defeated or discredited immediately, but the seeds planted.  

And, if in doubt, take the government at their word. There is no fiercer metric against which to measure the Tories than their own rhetoric. How can the party of working people cut the incomes of those who have done the right thing? How can the party who promised to protect the health service deliver a decade of the lowest ever increases in spending? How can the party of home ownership banish young people to renting? The power in holding a government to account is one wielded forensically and eloquently for it is in the gap between rhetoric and reality that ordinary people’s lives fall.

The key fact for an opposition is that it can afford to lose the day if it is able to win the argument. That is Labour’s task.