Don't blame Barclays alone

This is not a Barclays scandal, it's a banking scandal.

It’s always been easy to be angry with Barclays Bank. My campaigning goes back to the 1970s when Barclays were a target for the anti-apartheid movement (and rightly so). The past day has provided yet more ammunition for those who would like to single out this bank for attention, and I admit that I have been one of them since that has been what the media has demanded. And yet, we need to stand back and be calm (to misquote the famous poster).

Of course Barclays has admitted to a serious allegation. They helped rig markets. It is likely that ordinary people paid the cost of that manipulation. It is impossible that senior management did not know about this, but it is likely that they will walk away largely unscathed from the whole debacle, their bonuses apart.

It is however important to put this in context. Barclays was not alone in rigging this market. Indeed, they could not have done it alone. This failure was not, therefore, a failure of a particular bank. It was a failure of the banking system.

It is also very clear now that regulators knew about this failure by 2006, at least, and yet it has taken until 2012 for the first penalty to be imposed. There has, therefore, been a failure of the regulatory system as well, and a systemic one at that. The question is not therefore whether Bob Diamond should go (he should, very obviously) or whether Barclays  and other should be prosecuted (as seems possible to me under section 4 of the Fraud Act 2006); the real question should be what causes systemic failure, and what can we do about it. The answer to that question is to first of all change regulation and secondly to change the nature of banking.  In both cases the reason for change is a simple one, which is that the existing models of both banking and regulation are based on false hypotheses.

As Lord Turner reported in his 2009 report on the financial crash, regulation at the Financial Services Authority was based on the assumption that the efficient market hypothesis held true (page 39, here) He realised then that this was not true. Perhaps most importantly, two assumptions the FSA made, which were that market prices are good indicators of rationally evaluated economic value and that market discipline can be used as an effective tool in constraining harmful risk taking can now be seen to be not just wrong, but that they were fundamentally flouted  by banks rigging prices and manipulating markets to mitigate their risk at cost to others.

No wonder we had a crash: regulation assumed a bunch of innocent price taking banks all subservient to the market when nothing could have been further from the truth. It’s an unfortunate fact that regulation will have to be rebuilt on the basis that markets can’t be trusted and regulatory intervention will have to be the norm, not the exception. The era of "light touch regulation" has to be over.

That has implications for the structure of banking too. The assumption that they can be trusted is also implicit in the Vickers recommendations. Their suggestion that banks can be split under common ownership is dependent upon the belief that Chinese walls will be respected. It’s now clear that banks do not respect rules. More than that, manipulation between departments who were not meant to talk to each other was clearly commonplace at Barclays, and presumably elsewhere. On that basis Vickers has now to be consigned to history: the only way forward is to break banks up with high street and investment banking operations separated, for good.

So far we’ve wasted four years since the crash doing nothing to address the problems in our banking system. If this latest Barclays debacle does anything it suggests that the time for prevarication is over.

Barclays chief executive Bob Diamond has resisted calls for his resignation. Photograph: Getty Images.

Richard Murphy is an adviser to the Tax Justice Network and the TUC on taxation and economic issues. He is also the director of Tax Research LLP.

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Northern Ireland's political crisis ups the stakes for Theresa May

Unionism may be in greater immediate danger in Belfast than Edinburgh.

 Sinn Féin have announced that they will not put forward a candidate for deputy first minister, and barring a miracle, that means today's 4pm deadline for a new power-sharing executive will come and go. What next for Northern Ireland?

While another election is possible, it's not particularly likely. Although another contest might change the political composition at Stormont a little, when the dust settles, once again, the problem will be that the DUP and Sinn Féin are unable to agree terms to resume power-sharing.

That means a decade of devolved rule is ending and direct rule from Westminster is once again upon us. Who benefits? As Patrick explains in greater detail, a period of direct rule might be good news for Sinn Féin, who can go into the next set of elections in  the Republic of Ireland on an anti-austerity platform without the distracting matter of the austerity they are signing off in the North. The change at the top also allows that party to accelerate its move away from the hard men of the north and towards a leadership that is more palatable in the south..

Despite that, the DUP aren't as worried as you might expect. For one thing, a period of devolved rule, when the government at Westminster has a small majority isn't without upside for the DUP, who will continue to exert considerable leverage over May.

But the second factor is a belief that in the last election, Arlene Foster, their leader, flopped on the campaign trail with what was widely derided as a "fear" message about the consequences of the snap election instead of taking responsibility for involvement in the "cash for ash" scandal. That when the votes were cast, the Unionist majority at Stormont was wiped out means that message will have greater resonance next time than it did last time, or at least, that's how the theory runs.

Who's right? Who knows. But for Theresa May, it further ups the stakes for a good Brexit deal, particularly as far as the Irish border is concerned. A lot of the focus - including the PM's - is on her trip to Scotland and the stresses on that part of the Union. It may be that Unionism is in greater immediate danger in Belfast than Edinburgh.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.