Zak Mir on Barclays: The Ultimate “Diamond” Geezer!

4 mins. to read

The Set Up…

I have to admit that with regards to me and my memory, it is somewhat like a sieve – and that’s being flattering! Nevertheless, what sticks out in my mind about by book 101 Charts For Trading Success, now nearly two years old, is the way that the coverage of Barclays Bank was very much focused on the then head of its investment bank Barclays Capital – Bob Diamond.

My description of Mr Diamond was as someone you would not want to meet in a dark alley, or indeed, any alley. In fact, he’d already been collecting comments in a similar vein, before his appointment as CEO of Barclays at the beginning of January 2011. What we now know, as was revealed in 2012, is that the FSA also felt that he may not be quite the perfect candidate tp act as CEO. Sadly, they did nothing about it. I have the excuse that I was busy with other more pressing matters such as the never ending writing on my website; presumably the FSA were affected by contingencies of a similar nature..? Another incentive these days not to nip a scandal in the bud is that there is no “result” to justify the existence of the regulator, and no £300m fine when it gets really bad!

But it was interesting that this year I did run into someone who alleged to be a former employee of the FSA. He described the regulator as being an entity which is essentially the stepping stone for those wishing to get proper jobs in the city. On this basis their day-to-day “regulating” of firms such as Barclays and other financial groups is essentially a networking process ahead of them being given jobs around the City of London. Therefore, one would imagine that while FSA employees will always be keen to give the impression of being fully capable in what they are doing, the concept of not wanting to bite the hand that feeds them or may feed them in the future might come into play.

The idea also ties in with the concept that the only financial punishments we have seen have been limited ones in the form of fines rather than anything more serious such as closing down the relevant businesses or parts of businesses. Bank of Credit and Commerce International (BCCI) was closed 20 years ago largely on the basis, I presume that it was founded by a Pakistani (my heritage), and secondly that massive money laundering was alleged. Massive money laundering at Standard Chartered (STAN) et al led only to fines.

I see closing down a bank, if only as an example to others, as the only thing which would be a guarantee of prevention in future of scandals such as payment protection insurance and of course Libor. It seems clear that a £300 million fine for a company generating several billion a year is no more than a slap on the wrist, especially when the concept of reputational damage does not really exist given how the man in the street already loathes the banking sector for a myriad of reasons.

Indeed, all that a fine tends to be is no more than a windfall tax which, given the way that such business models work, will ultimately be paid by the retail customer of course. But of course, the retail customer was the main victim of Libor in the first place. But over and above the not killing the goose that lays the golden egg fine issue, there is another possible explanation apart from the regulator fining in order to fund its future/justify its existence. It is the way that given the nature of many complex financial instruments and practices, it would be almost impossible to get a jury to convict a Libor offender (apart from saying that they are greedy/horrible people), just as it would be next to impossible to get a jury to convict a fraudulent short seller who manipulates share price movements with malicious rumours regarding a company in order to drive it to financial destruction. Quite simply they wouldn’t understand it.

The fact that hardly anyone outside the professional arena and seasoned traders understands the concept of short selling means that those who profit from malicious share price declines, are immune from the legal process, in a way that insider traders on the long side can only dream of…

The above is an extract from my new eBook, Lessons From The Financial Markets For 2013, covering Barclays. In fact, as it was written a few weeks before it was announced that former FSA Chief Hector Sants was joining Barclays in a compliance role. The paragraph highlighted in bold foretold this move, and to my mind, you really could not make it up.  

Given that Sants was in charge of an FSA that missed the greatest financial crisis in history, the fall of the UK banking  sector and Libor, one would doubt that he is being hired for his compliance skills, and more on the hope that a similar sleepy approach might allow Barclays to get on with business as usual undisturbed, but with a high quality figurehead on the regulatory side.

Lessons From The Markets For 2013 is available on  CLICK BELOW OR THE IMAGE TO BUY


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