The Libor scandal is yet another blow to the reputation of the City of London. Alistair Darling may have been right when he told George Osborne that we’re ‘kidding ourselves if we think this was the only country where this happened.’ But there’s no getting away from the fact that an uncomfortably large number of financial scandals start in London.
In the Commons, Osborne seemed keen to move towards a more American-style system of regulation with more prosecuting powers for the FSA and new criminal offences. But he was also keen to make a political point, this happened under the last government and a regulatory system set up by Gordon Brown and Ed Ball. Given that Cameron echoed this point just now on the BBC, it is clear that the Tories want to try and hang this scandal round Balls’ neck. I’m told that they intend to ‘hammer him on this’.
Balls himself wasn’t in the Commons, he’s addressing the Local Government Association conference today. But I expect we’ll see political battle joined on this in the next few days as Ed Miliband poses as a tribune of the people by calling for Barclays boss Bob Diamond to resign while the Tories try to pin the blame on Labour’s regulatory system.
On the fine paid by Barclays, Osborne announced that he was planning a retrospective change so that these fines go to the Treasury rather than simply leading to a reduction in the levy that other financial institutions pay for the running of the FSA. But he also needs to look urgently at the size of the fines that the FSA can levy. It fined Barclays £60 million, reduced from £85 million because the bank cooperated. But this fine doesn’t reflect the level of wrongdoing exposed by this investigation.
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