Posted on 2012-07-05 | 11:34

That is what happens when someone is put on a trading floor, and I speak as somebody who worked in a bank.

Many years ago I worked for Coutts, when it did what traditional retail banks did—what the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) described, and what the general public want. But if somebody is put on a trading floor and deals in obscure derivatives and other financial products, they will be either corrupted by what goes on, crushed by their peers or, if he or she is very brave, turned into a whistleblower.

Of course, there is a culture in banking that needs to be looked at—the culture of remuneration and bonuses. However, it is not just banking that has a culture whereby somebody who is paid to do a job, such as a nurse, teacher or bank clerk, and then expects to get a massive great bonus for doing it, irrespective of whether they do it well or badly. This is far removed from the lives of the general public because of the amounts of money being talked about. Bob Diamond has earned £100 million, and if he walks away the question is whether he will get £20 million. Twenty million pounds is way beyond what the vast majority of our constituents can expect to earn in a lifetime, even if we add in their pension pots, so we are talking about a surreal world as far as the wider public are concerned.

To be fair to the Business Secretary, he has said that the problem can be addressed through shareholder power. That is naïve, however, because the biggest shareholders of public companies are the institutions—and many of the people in those institutions sit on other boards, so it all becomes an incestuous circle. Different remuneration committees can consist of the same people. It all comes down to, “I’ll scratch your back if you scratch mine.”

If the Government were serious about making radical changes to the culture that I have just referred to, they could do worse than limit the number of directorships of publicly quoted companies that any one person can have. They could also change the rules so that the remuneration committees of all publicly quoted companies had a majority of small shareholders. That would really send shock waves across the institutions, but not the shareholders, who would welcome the opportunity.

Time is running out. We need to change not just the culture but the structure of banking. In 1986, the wild west came back—all the firewalls and protections put in place following the previous financial crisis in 1929 were swept away. We are all responsible in some part for that; we created the masters of the universe, who have not done us any favours. We have to go back to basics and reconstruct a banking system that is fit for purpose, serves the people and is not self-serving for a small minority.