Did the UK banking sector really commit £20.2bn worth of villainy in 2012?

Massive penalties for banks are becoming business as usual.

A couple of weeks ago, I pointed out that the financial results the media most cares about in a post-2008 world are fines and bonuses, rather than profit or turnover.

In the circumstances, I was talking about how any attempt to find something worthy of outrage in Google’s fine or bonus totals was trivial in the context of the digital behemoth’s bottom line.

Now, however, the availability of full year results from the UK’s major banks has prompted KPMG to agree that the numbers connected with reputational capital are now central to banking performance – and not in any woolly long-term sense, but in the here and now.

According to the report, while 2012’s “core profits” for the UK’s Big Five (Barclays, HSBC, Lloyds Banking Group, RBS and Standard Chartered) were up 45 per cent up year-on-year due to lower bad debt and steadier investment banking performance, “regulatory fines, customer redress provisions and the accounting consequences of improved creditworthiness” had in fact blown statutory profits in the other direction, to a level 40 per cent lower than the previous year.

This round of snakes and ladders, according to KPMG, made the difference between a combined core profit of £31.5 bn, and actual statutory profits of £11.7 bn.

Before concluding that the UK banking sector committed £20.2bn worth of villainy in 2012, it must be pointed out that the “key snakeholder” in this set of adverse events, at £12.8bn, was in fact the “accounting consequences of improved creditworthiness” – eg a downward revision of post-tax profits due to the revaluation of "own debt" in the context of increased financial health.

Ironically in this regard, banks were making better profits when they were less creditworthy. But that’s financial reporting for you.

But even taking this into account, KPMG identified around £12bn* of profit modifiers linked directly with misbehaviour, including the PPI mess, the Libor scandal, the mis-selling of derivatives products to SMEs, and weaknesses in anti-money laundering measures.

In a headline statement, the head of KPMG’s EMA Financial Services practice, Bill Michael, said banks had had “a dire year” in reputational terms, adding that the sector’s number one priority at this stage should be “restoring public trust.”

A quick look at the related headlines under any article covering the KPMG report underlines Michael’s point succinctly:

“JP Morgan accused of hiding losses”, “More than 500 bankers paid £1m-plus”, “UBS banker gets $26m 'golden hello'” (feel the acid dripping from those quote marks). “Barclays gets caught out by $900m trade”, “bosses handed £40m bonus pot” – the list could go on for paragraphs.  

With these “exceptional events” becoming everyday occurrences for an increasingly jaded customer base, one has to wonder whether the sector is capable of reinventing its behaviour from the ground up, or whether it would be better off just considering the regular imposition of massive penalties to be business as usual.  

* According to KPMG, the £20.2bn difference in core and statutory profit was a net figure, comprising around £24.8bn in negative modifiers, and £4.6bn in positive ones.

Fireworks from KPMG. Photograph: Getty Images

By day, Fred Crawley is editor of Credit Today and Insolvency Today. By night, he reviews graphic novels for the New Statesman.

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Richmond is a victory for hope - now let's bring change across the country

The regressives are building their armies. 

Last night a regressive alliance was toppled. Despite being backed by both Ukip and the Conservative Party, Zac Goldsmith was rejected by the voters of Richmond Park.

Make no mistake, this result will rock the Conservative party – and in particularly dent their plans for a hard and painful Brexit. They may shrug off this vote in public, but their majority is thin and their management of the post-referendum process is becoming more chaotic by the day. This is a real moment, and those of us opposing their post-truth plans must seize it.

I’m really proud of the role that the Green party played in this election. Our local parties decided to show leadership by not standing this time and urging supporters to vote instead for the candidate that stood the best chance of winning for those of us that oppose Brexit. Greens’ votes could very well be "what made the difference" in this election (we received just over 3,500 votes in 2015 and Sarah Olney’s majority is 1,872) - though we’ll never know exactly where they went. Just as importantly though, I believe that the brave decision by the local Green party fundamentally changed the tone of the election.

When I went to Richmond last weekend, I met scores of people motivated to campaign for a "progressive alliance" because they recognised that something bigger than just one by election is at stake. We made a decision to demonstrate you can do politics differently, and I think we can fairly say that was vindicated. 

There are some already attacking me for helping get one more Liberal Democrat into Parliament. Let me be very clear: the Lib Dems' role in the Coalition was appalling – propping up a Conservative government hell bent on attacking our public services and overseeing a hike in child poverty. But Labour’s record of their last time in office isn't immune from criticism either – not just because of the illegal war in Iraq but also their introduction of tuition fees, privatisation of our health service and slavish worship of the City of London. They, like the Liberal Democrats, stood at the last election on an austerity manifesto. There is a reason that we remain different parties, but that doesn’t mean we shouldn't also seize opportunities like this to unite behind what we have in common. Olney is no perfect candidate but she has pledged to fight a hard Brexit, campaign against airport expansion and push for a fair voting system – surely progressives can agree that her win takes us forward rather than backwards?

Ultimately, last night was not just defeat of a regressive alliance but a victory for hope - a victory that's sorely needed on the back of of the division, loss and insecurity that seems to have marked much of the rest of this year. The truth is that getting to this point hasn’t been an easy process – and some people, including local Green party members have had criticisms which, as a democrat, I certainly take seriously. The old politics dies hard, and a new politics is not easy to forge in the short time we have. But standing still is not an option, nor is repeating the same mistakes of the past. The regressives are building their armies and we either make our alternative work or risk the left being out of power for a generation. 

With our NHS under sustained attack, our climate change laws threatened and the increasing risk of us becoming a tax haven floating on the edge of the Atlantic, the urgent need to think differently about how we win has never been greater. 

An anti-establishment wave is washing over Britain. History teaches us that can go one of two ways. For the many people who are utterly sick of politics as usual, perhaps the idea of politicians occasionally putting aside their differences for the good of the country is likely to appeal, and might help us rebuild trust among those who feel abandoned. So it's vital that we use this moment not just to talk among ourselves about how to work together but also as another spark to start doing things differently, in every community in Britain. That means listening to people, especially those who voted for Britain to leave the EU, hearing what they’re saying and working with them to affect change. Giving people real power, not just the illusion of it.

It means looking at ways to redistribute power and money in this country like never before, and knowing that a by-election in a leafy London suburb changes nothing for the vast majority of our country.

Today let us celebrate that the government's majority is smaller, and that people have voted for a candidate who used her victory speech to say that she would "stand up for an open, tolerant, united Britain".  But tomorrow let’s get started on something far bigger - because the new politics is not just about moments it's about movements, and it will only work if nobody is left behind.

 

Caroline Lucas is the MP for Brighton Pavilion.