FSA boss denounces 'cynical greed' at investment banks
The investment banking industry has been denounced for its "cynical greed" by the chairman of the Financial Services Authority (FSA), Lord Turner.
In a speech at the FSA's annual meeting, he said the Barclays Libor scandal had dealt a "huge blow" to the banking industry's reputation.
And he demanded that investment banking be "purged" of its "culture of cynical entitlement".
He demanded that banking focus on customers instead of making profits.
Lord Turner said it was a "major challenge" for the investment banking industry to concentrate on what he called "fundamental economic functions".
These included, "raising capital for companies creating real wealth, [and] managing customer risks rather than creating new risks to bet against".
And he demanded action to "purge the industry of the culture of cynical entitlement which was far too prevalent before the crisis".
'Shoddy wholesale practice'
Lord Turner's speech also echoed a previous comment, made at the height of the banking crisis, that much of investment banking was "socially useless"
"Too much of what is described in the investment banking world as 'creative' or 'innovative', is not creative or innovative on behalf of the real economy," he said.
He pointed to the creation of complex tax avoidance schemes, attempts to dodge the full impact of financial regulation, and the use of accounting to gloss over the debts of banks, clients and even countries.
Lord Turner also warned that one of the FSA's successor bodies, the Financial Conduct Authority (FCA) would consider stricter scrutiny of the way banks dealt with professional clients, such as pension funds and insurance firms, and not just regulate the way the industry deals with members of the public.
"An insurance company or pension fund may be itself a large institution, but sitting behind the company or pension fund are retail investors: and any poor practice which unreasonably shifts income to the industry is at the expense of some end retail customer," he said.
"There are no free lunches, and shoddy wholesale practice is not a victimless act, even in those cases where it is not defined as a crime."
Last week the governor of the Bank of England, Sir Mervyn King, demanded change in both the culture and structure of UK banks, saying they had been guilty of the "shoddy" treatment of customers.
He demanded immediate and profound changes in the light of excessive pay, the Libor scandal, and the mis-selling of PPI policies and interest rate "insurance" to small businesses.