Banking is in disgrace: time to end casino carelessness

OPINION: The Ulster Bank glitch is the latest reminder of ‘bankster’ ignominy, but Ireland can seize the opportunity for change

IF A bank cannot deliver its core purpose to its customers so they can can use it to receive and pay out money, it should lose its licence to operate.

There is no more serious business failure for a bank , bringing in its wake as it does vast economic and social consequences. It’s like a water company unable to supply water or a power company gas and electricity. Yet by the middle of this month up to 600,000 customers of Ulster Bank will have been in this position for four weeks – a calamity.

The now yawning gap between bank managements and their customers was once again revealed by the reaction of Ulster Bank chief executive Jim Brown to the Oireachtas committee this week inquiring into the affair. Brown said he would not refuse his bonus now but would decide only at the end of the year.

Later he issued a “clarification” for what even Ulster Bank recognised as a public relations disaster, explaining that because customer service and re-earning trust were a priority, he had decided to tell the bank’s board that “I do not wish to be considered for an annual bonus award for 2012”.

Should we cheer? We should weep.

Evidently the criteria for Brown’s annual bonus – and note that a long-term incentive plan on top of this bonus would be standard – mean it is set up as an entitlement. There can be no requirement that he should first perform all aspects of his job, like ensuring the bank delivers its basic service to customers, before any bonus is awarded: rather the bonus is a payout with the slenderest of performance criteria which the Ulster Bank board would have had to give Brown had he not volunteered to relinquish it.

We have had a telling glimpse into the amoral, venal world of contemporary banking in which service comes well behind personal remuneration – sanctioned by weak bank boards happily pocketing their own fees. When the hue and cry has died down, the array of long-term incentive plans and discretionary payments that will make a very rich man of Brown, an executive unable to ensure his bank delivers a basic utility service, will quietly kick in.

It was one more small milestone in the long migration of British and Irish banking from being industries that, however imperfectly they used to serve their customers and business communities, at least could be relied upon to be solid and deliver the utility dimension of banking.

No more. They have become instruments for the self-enrichment of those who work in them and who see their customers – from ordinary work-a-day men and women mis-sold absurdly complex financial products to the large institutions with whom they do business in the over-the-counter markets in opaque financial derivatives – as objects to be fleeced.

Hence the Libor scandal that has consumed Barclays and soon the other banks with whom Barclays colluded: hence mis-selling scandal after mis-selling scandal; hence Ulster Bank’s – along with NatWest and RBS of which it is part – inability to run a banking service; and above all the legacy in Britain and Ireland of a crushing mountain of private debt that should never have been lent.