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:

Barclays

  • 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.”

FSA

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: André Spicer
Show Hide image

“It’s scary to do it again”: the five-year-old fined £150 for running a lemonade stand

Enforcement officers penalised a child selling home-made lemonade in the street. Her father tells the full story. 

It was a lively Saturday afternoon in east London’s Mile End. Groups of people streamed through residential streets on their way to a music festival in the local park; booming bass could be heard from the surrounding houses.

One five-year-old girl who lived in the area had an idea. She had been to her school’s summer fête recently and looked longingly at the stalls. She loved the idea of setting up her own stall, and today was a good day for it.

“She eventually came round to the idea of selling lemonade,” her father André Spicer tells me. So he and his daughter went to their local shop to buy some lemons. They mixed a few jugs of lemonade, the girl made a fetching A4 sign with some lemons drawn on it – 50p for a small cup, £1 for a large – and they carried a table from home to the end of their road. 

“People suddenly started coming up and buying stuff, pretty quickly, and they were very happy,” Spicer recalls. “People looked overjoyed at this cute little girl on the side of the road – community feel and all that sort of stuff.”

But the heart-warming scene was soon interrupted. After about half an hour of what Spicer describes as “brisk” trade – his daughter’s recipe secret was some mint and a little bit of cucumber, for a “bit of a British touch” – four enforcement officers came striding up to the stand.

Three were in uniform, and one was in plain clothes. One uniformed officer turned the camera on his vest on, and began reciting a legal script at the weeping five-year-old.

“You’re trading without a licence, pursuant to x, y, z act and blah dah dah dah, really going through a script,” Spicer tells me, saying they showed no compassion for his daughter. “This is my job, I’m doing it and that’s it, basically.”

The girl burst into tears the moment they arrived.

“Officials have some degree of intimidation. I’m a grown adult, so I wasn’t super intimidated, but I was a bit shocked,” says Spicer. “But my daughter was intimidated. She started crying straight away.”

As they continued to recite their legalese, her father picked her up to try to comfort her – but that didn’t stop the officers giving her stall a £150 fine and handing them a penalty notice. “TRADING WITHOUT LICENCE,” it screamed.


Picture: André Spicer

“She was crying and repeating, ‘I’ve done a bad thing’,” says Spicer. “As we walked home, I had to try and convince her that it wasn’t her, it wasn’t her fault. It wasn’t her who had done something bad.”

She cried all the way home, and it wasn’t until she watched her favourite film, Brave, that she calmed down. It was then that Spicer suggested next time they would “do it all correctly”, get a permit, and set up another stand.

“No, I don’t want to, it’s a bit scary to do it again,” she replied. Her father hopes that “she’ll be able to get over it”, and that her enterprising spirit will return.

The Council has since apologised and cancelled the fine, and called on its officials to “show common sense and to use their powers sensibly”.

But Spicer felt “there’s a bigger principle here”, and wrote a piece for the Telegraph arguing that children in modern Britain are too restricted.

He would “absolutely” encourage his daughter to set up another stall, and “I’d encourage other people to go and do it as well. It’s a great way to spend a bit of time with the kids in the holidays, and they might learn something.”

A fitting reminder of the great life lesson: when life gives you a fixed penalty notice, make lemonade.

Anoosh Chakelian is senior writer at the New Statesman.