Don't be fooled by banks warning of a talent exodus. Public trust is plunging and the industry needs urgent reform
Bankers and ordinary human beings live in such totally different worlds that they regard each other with as much incomprehension as they would aliens from another planet. The gulf between the two sides was brought into sharp relief during the grilling of Barclays chief executive Bob Diamond earlier this year by a parliamentary select committee. Diamond treated demands that he forgo his potential £8m payout for 2010 with apparent contempt: he would decide "with family" whether or not to accept the payout, he said, arguing that bonuses were an immutable fact of banking life and that the time for remorse and apology by bankers was over.
Diamond and his ilk just don't get it, the rest of us don't get why they don't get it, and they don't get why we don't get it. But while attitudes such as his prevail, banker bashing will continue unabated, and until the government puts its foot down, these views and associated behaviours will persist.
But if there were ever a case of the emperor wearing no clothes, the exalted, untouchable status the banks and top bankers enjoy is it. How can anyone be worth £8m a year, and how can anyone—not just the bankers themselves—believe that they are, particularly given the scale of the damage they have wrought?
But rather than learning from experience, it seems that the government and others are colluding in the fantasy that keeping top bankers sweet and preserving the status quo is essential to ensuring that banks don't fail again. Instead of trying something different, they allow them to continue in their old ways, marshalling in their defence the usual spurious arguments—chief among them having to pay top dollar to attract and keep the best people.
Research showing that bonuses don't improve—and can worsen—performance for anything other than the most mundane tasks, and that superstardom in one firm rarely translates into superstardom in another, nails this lie.
More interesting is what the banks mean by "the best people". What particular blend of skills and talents are they seeking? After all, most people going into law, medicine, teaching or business have some sense of vocation, with the likely rewards being largely secondary. Most of us are happy to do a good job for a reasonable wage, without an additional incentive, and few of us will have messed up on the scale the bankers did.
But what attracts people into banking, which is all about money, other than money? If so, doesn't that make bankers little more than mercenaries, whose loyalty is not to their stakeholders, but only to themselves? Are those the best people to be running our biggest and most powerful institutions? A further quality for a successful banker seems to be the kind of arrogance that leads to the assumption that everyone else is stupid. Why else would they sneak interest rates up or down to widen their margins or impose fees for everything from late payment to inactivity, justifying their actions by concerns about debt default—and expect us to swallow it easily?
Why else would they assume we'd be impressed with the kind of patronising PR puff embodied in the new Customer Charter from NatWest, which aims to become "Britain's most helpful bank" by, among other stunningly original ideas, opening some of its branches on Saturdays, early in the mornings and late in the evenings?
And why else would they defend their mega-size against the threat of break-up on the grounds that customers benefit from economies of scale, integrated service and free personal banking, when it is abundantly clear that the only people who have benefited is the bankers themselves. Being too big to be allowed to fail—which is what the banks are—is different from being too big to fail which, as recent history demonstrates, is clearly not the case.
Trust in banks is low and falling, eroded not just by the bonus culture, reluctance to lend to small businesses and the unfettered ambition that led to the recession, but also by myriad smaller assaults on the customer.
Banks seem to hold all the cards, but unless they start paying more heed to the responsibilities that are the corollary of the rights they are so fond of invoking, they may find that public hostility is more damaging to the UK's fragile reputation as a leading financial services centre than any attempt at unilateral reform of the industry could ever be.
Indeed, unilateral reform would demonstrate the kind of strong leadership that could both cement our reputation as a financial services hub and improve the banking system. If the best talent really wants to go, then let it: the second- and third-best could prove much more effective.
