The curious case of Standard Chartered

And another bad week for banking.

This has been another bad week for the banking industry. For all that some sections of the media will enjoy presenting the allegations against Standard Chartered as the latest example of greedy bankers putting financial interests before ethics or morals, this episode feels more nuanced

That it involves the self-proclaimed "boring bank" Standard Chartered, previously praised by myself and several much wiser industry experts for its prudence and caution through boom and subsequent financial crisis, is unexpected. That it involves a UK bank allegedly consorting with drug dealers, terrorists and Iranian militants seems even stranger. So what does this episode teach us about the state of banking?

1. The banking industry is no longer held in high regard. Had the allegations been made against a firm in another industry or profession there would have been genuine shock as well as outrage. But we appear to have reached some kind of greed fatigue when it comes to bankers. The only surprise at this latest revelation was that it involved a bank formerly thought to be above the rest. Standard Chartered’s reputation (not to mention its share price) has taken a hit and will take a while to recover.

2. International finance is extremely complex. This is easy to believe because it’s only when a fresh scandal breaks that some new complexity of the financial system is revealed. Very few outside the Square Mile knew a collatoralized debt obligation from a credit default swap before the 2008 financial crisis. Some within the City (including senior figures) struggled to explain them even when they’d turned bad and taxpayers were footing the bill. Every awkward revelation since has unveiled a bit more complexity. One reason ex-Barclays CEO Bob Diamond gave little away to the Treasury Select Committee was because they didn’t know enough of the detail. A simple question from Bob about which Libor rate they were referring to would have stymied most of the committee. Very few people understand enough to take bankers to task. Regulating and overseeing this complexity is tough. It’s hard to even begin to guess where the next scandal will be, what fresh villainy it will reveal and what new complexity will be uncovered. We need banking legislation that can cover what Donald Rumsfeld would call the unknown unknowns.

3. We need prudence back. It became something of a comical phrase after Gordon Brown first wore it out as chancellor and then abandoned it when the sums got tricky. But effective regulation of banks requires prudent valuation of their complex financial dealing and of assets and liabilities. It used to be an essential element of all accounting best practice, but has been increasingly forgotten as modern standards (including IFRS) place the emphasis elsewhere. More thorough auditing and prudent valuation of all banking activities would be a sensible start.

4. We need banks to exercise self-control. It’s obvious that current systems for regulation haven’t worked. While some changes are taking place on a national level, there is still not enough international co-operation. On the plus side, the most recent scandals have come to light as a result of regulators investigating and reporting on alleged bad behaviour. But it’s a slow process and is all too retrospective. As always, financiers are innovating ahead of regulators. Bankers hate the idea of introducing excessive regulation on financial markets. And it wouldn’t help the world economy. But they have to show that the financial services industry can take responsibility for its own actions. We don’t need more regulation, but we do need better, more effective regulation. This requires better internal auditing, stronger compliance regimes and more self-control on the part of the banks. To use Diamond’s phrase, we need more banks with a culture where people behave ethically when no one’s watching.

5. Regulators are also subjective. One of the problems the Standard Chartered case has highlighted is that the complexity, power and importance of banking itself means that banking regulation must also be highly complex. It also attracts the attention of some who would seek to use the potential power for other means. The focus of the Standard Chartered allegations on dealing with Iran has led some observers to suggest the claims serve a wider political purpose in the US. While it’s not clear what that purpose might be, other than rubbishing London at the expense of New York, the claim highlights how national best interests are rarely aligned with either individual commercial goals or the wider global good.

6. It’s time for an international banking amnesty. With each revelation of wrongdoing we learn something new about the banks and something depressing about our society. We should waive further fines or punishments if all the banks agree to sign up once and for all to a thorough and totally transparent immediate assessment of all of their books. Like some sort of one-off super-audit, it would allow them to own up now to all the things they would normally like auditors and regulators not to see. We need to know where all the bodies are buried, right across the system.

This article first appeared in economia.

Standard Chartered. Photograph: Getty Images

Richard Cree is the Editor of Economia.

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UK to reconsider blood donation ban for men who have sex with men

Under current rules, men who have had sex with another man in the past twelve months cannot donate blood.

During Women and Equalities questions this morning, Jane Ellison MP slipped in a bombshell: men who have sex with other men may soon be able to donate blood. 

Ellision, who is Undersecretary of State for Public Health, said that Public Health England has carried out a new survey of blood donors which is currently being analysed. Next year, the Advisory Committee on the Safety of Blood Tissues and Organs (SaBTO), which sets blood donation guidelines, will use the evidence to review the current policy. 

She said:

Donor referrel for MSM [men who have sex with men] was changed from lifetime to 12 months referral in 2011. Four years later it is time again to look at this issue. Public Health England has conducted an anonymous survey of donors and I'm pleased that the advisory SaBTO will review this issue in 2016.

The current ban (which also applies to a range of other groups including sex workers) is based on the fact that MSM are at higher risk of contracting HIV, according to every Public Health England survey ever conducted on the disease. Both HIV and Hepatitis C don't show up in blood tests immediately, so the 12 month rule is based on leaving a "window" for the diseases to develop and be testable. The rules are ostensibly based on sexual activity, not on sexual orientation.

However, as Michael Fabricant pointed out in response to Ellison's announcement, in practice, it also looks a lot like discrimination - there is no ban on blood donation from straight people who have had unprotected sex, for example. Fabricant continued that "equality on this issue" is needed, and clinicians themselves feel a change is "long overdue".

Blood donations in the UK have fallen by 40 per cent in the last decade, a fact which may have contributed to the decision to review the current rules.

A Stonewall spokesperson said:

We’re delighted the Department of Health Minister Jane Ellison has announced this review.

We want a donation system that is fair and based on up-to-date medical evidence. Currently gay and bi people cannot give blood if they have had sex in the past 12 months,  regardless of whether they used protection. Yet straight people who may have had unprotected sex can donate. These current rules are clearly unfair and we want to see people asked similar questions - irrespective of their sexual orientation - to accurately assess the risk of infection. Screening all donors by sexual behaviour rather than by sexual orientation would increase blood stocks in times of shortage and create a safer supply by giving a more accurate, non-discriminatory assessment.

Barbara Speed is a technology and digital culture writer at the New Statesman and a staff writer at CityMetric.