Tuesday 19 November 2013

The crazy, drug-fuelled world of ethical banking

Before it became a “campaigning” newspaper with an alleged penchant for testing the legal limits of news-gathering, the News of the World’s stock in trade was exposing naughty vicars.

Could there be any more enjoyable way to fill the interlude between a bracing sermon and a fine roast dinner than by reading about some dog-collared hypocrite who was dallying with one of his parishioners’ wives, or interfering with his choirboys?

Nothing, surely, except reading about the well-deserved come-uppance of a politician or bank manager.

So it seemed peculiarly sad that the News of the World was not around last weekend to devote its front page (and several further spreads inside) to the exposure of someone who is not only a Methodist minister but a politician and banker as well.

I refer, of course, to the Rev Paul Flowers, Labour party stalwart and former Chairman of the Co-operative Bank, who was amazingly captured on film by the Mail on Sunday trying to buy crystal meth, cocaine and other assorted hard drugs.

He texted of his plans for “a two-day, drug fuelled gay orgy” to provide some much-needed light relief after his grilling by a committee of MPs, to which he had demonstrated a startlingly profound ignorance of banking in general, and of the bank he was supposed to have been chairing in particular.

Inevitably inviting questions as to how an overweight clergyman with a Mr Pastry moustache came to be in nominal charge of the country’s leading ethical banking institution.

You may recall similar questions being asked about the qualifications of some members of the board of Northern Rock after its collapse, though none ever seemed as hopelessly out of his depth as the portly minister.

It seems clear that the Rev Flowers attained his position through political manoeuvring within the co-operative movement. But his appointment still had to be approved by the regulators at the FSA, charged with ensuring that the banking system is run by fit and proper persons.

Whatever were they thinking? Surely they can’t have been imagining that a man of the cloth would at least be above the bonus-driven machinations of a money-obsessed professional banker?

While the tale has all the ingredients of high comedy, a profoundly serious point arises from it. Namely that if banking has now become so complicated that only professional bankers can understand it, who can we get to supervise them in a non-executive capacity?

Clearly you should not be on a board of any kind if you struggle to understand accounts, but I suspect that cynical common sense could still get the averagely intelligent lay person quite a long way.

If the returns on an acquisition or investment seem too good to be true, that will be because they are too good to be true. Forget it and move on to the next item on the agenda.

If people who are motivated purely by greed and fear can attain even more stratospheric bonuses by bending the rules, you can be sure as day follows night that they will bend the rules. So increase the fear element by making doubly sure they will be caught and punished if they do so.

Running banks and building societies should be a simple enough business, securing the deposits of those who have more cash than they currently need and lending it to those who have a use for it. 

Instead it has become dominated by vastly over-rewarded individuals obsessed with slashing jobs and costs, lending only to those who don’t need the money, investing in impossibly complex wheezes and forcing the genuinely hard-up into the hands of Wonga and its kin.

The Archbishop of Canterbury, with his strong business background, would clearly make a fine addition to any bank board, but we cannot expect the poor man to sit on all of them in the absence of a great leap forward in cloning technology.

So what I feel we need are more hard-headed northerners prepared to tell these greedy fools a few home truths about what banks are for; and, in the case of the Co-op, to restore my Christmas divi while they are about it.

Would anyone without a serious drug habit care to volunteer?

Originally published in The Journal, Newcastle upon Tyne.

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