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.
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A swimming pool and a bleeding toe put my medical competency in doubt

Doctors are used to contending with Google. Sometimes the search engine wins. 

The brutal heatwave affecting southern Europe this summer has become known among locals as “Lucifer”. Having just returned from Italy, I fully understand the nickname. An early excursion caused the beginnings of sunstroke, so we abandoned plans to explore the cultural heritage of the Amalfi region and strayed no further than five metres from the hotel pool for the rest of the week.

The children were delighted, particularly my 12-year-old stepdaughter, Gracie, who proceeded to spend hours at a time playing in the water. Towelling herself after one long session, she noticed something odd.

“What’s happened there?” she asked, holding her foot aloft in front of my face.

I inspected the proffered appendage: on the underside of her big toe was an oblong area of glistening red flesh that looked like a chunk of raw steak.

“Did you injure it?”

She shook her head. “It doesn’t hurt at all.”

I shrugged and said she must have grazed it. She wasn’t convinced, pointing out that she would remember if she had done that. She has great faith in plasters, though, and once it was dressed she forgot all about it. I dismissed it, too, assuming it was one of those things.

By the end of the next day, the pulp on the underside of all of her toes looked the same. As the doctor in the family, I felt under some pressure to come up with an explanation. I made up something about burns from the hot paving slabs around the pool. Gracie didn’t say as much, but her look suggested a dawning scepticism over my claims to hold a medical degree.

The next day, Gracie and her new-found holiday playmate, Eve, abruptly terminated a marathon piggy-in-the-middle session in the pool with Eve’s dad. “Our feet are bleeding,” they announced, somewhat incredulously. Sure enough, bright-red blood was flowing, apparently painlessly, from the bottoms of their big toes.

Doctors are used to contending with Google. Often, what patients discover on the internet causes them undue alarm, and our role is to provide context and reassurance. But not infrequently, people come across information that outstrips our knowledge. On my return from our room with fresh supplies of plasters, my wife looked up from her sun lounger with an air of quiet amusement.

“It’s called ‘pool toe’,” she said, handing me her iPhone. The page she had tracked down described the girls’ situation exactly: friction burns, most commonly seen in children, caused by repetitive hopping about on the abrasive floors of swimming pools. Doctors practising in hot countries must see it all the time. I doubt it presents often to British GPs.

I remained puzzled about the lack of pain. The injuries looked bad, but neither Gracie nor Eve was particularly bothered. Here the internet drew a blank, but I suspect it has to do with the “pruning” of our skin that we’re all familiar with after a soak in the bath. This only occurs over the pulps of our fingers and toes. It was once thought to be caused by water diffusing into skin cells, making them swell, but the truth is far more fascinating.

The wrinkling is an active process, triggered by immersion, in which the blood supply to the pulp regions is switched off, causing the skin there to shrink and pucker. This creates the biological equivalent of tyre treads on our fingers and toes and markedly improves our grip – of great evolutionary advantage when grasping slippery fish in a river, or if trying to maintain balance on slick wet rocks.

The flip side of this is much greater friction, leading to abrasion of the skin through repeated micro-trauma. And the lack of blood flow causes nerves to shut down, depriving us of the pain that would otherwise alert us to the ongoing tissue damage. An adaptation that helped our ancestors hunt in rivers proves considerably less use on a modern summer holiday.

I may not have seen much of the local heritage, but the trip to Italy taught me something new all the same. 

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear