Stop pretending banks are ordinary businesses
Banks need to be like household utilities if we are to avoid further catastrophes
Bank of Ireland on College Green in Dublin.
The Central Bank has warned that the Government’s ban on bankers’ bonuses represents a “current and future risk” to the stability of the banking sector. This raises the question as to whether have we learned anything about how to run retail banks.
A decade after David Drumm fine-tuned his strategy for refinancing Anglo Irish Bank in his barnstorming “We need the moolah” performance, we still do not know how to repair our dysfunctional retail banks and prevent the next scandal.
It is hard to believe that the bailout is a few banking scandals ago. Who can even remember the drearily-titled foreign exchange overcharging scandal of 2006, a snip at €65 million. We have a rich history of banking controversies and crises in Ireland: Dirt, Faldor, Ansbacher, Rusnak, Merchant Banking, ICI, Maple 10 and mortgage trackers.
The rich variety of bank wrongdoing is bewilderingly complex from facilitating tax evasion, to mis-selling, overcharging, loan modification and forgetting politicians’ loans, to name but a few.
Almost a decade after the €64.6 billion bailout the banks have never really stopped their sharp practice. One crisis runs into another. With each passing scandal we build up a tolerance and a sense that we are hopelessly powerless to end bad practice.
The scandals have an odd bureaucratic systemness to them; it is fiendishly hard to find a culprit. Vast armies of bankers, often in lots of different banks, appear to have, at the same time, undertaken the same set of shady practices. When they finally surface in the public domain these poor practices appear to have arisen out of nowhere, buried in policy, institutional consensus and the veil of organisation. When we make attempts to diagnose them we appear to be shouting at the wind of ‘banking culture’. Indeed, the banking industry has now cottoned on to the need to repair this thing called ‘banking culture’ without really ever saying what a banking culture is.
We are a fair distance from the imaginary banks that we had in the 1960s, that appeared to try to dissuade people in the use of money, discourage borrowing and emphasis a kind of de Valera-style austerity. If as a child you received a Henry the Hippo savings box, you might have found the encounter at the mahogany counter intimidating. Bankers were austere, pernickety, dour, miserable sorts, emotionally stunted, incapable of fun, rather Calvinistic. Knowing our experience of these institutions, and the possibly inappropriately high regard that banks and bankers were once held in, we have to wonder where it all went wrong. Not to sugar coat these glory days, but knowing what we have lost in banking culture is the starting point of putting this humpty back together.
Central to the transformation was the change in work practices that happened in the 1970s. The “job for life” where care between bank and banker was long term and reciprocal was abandoned. Bankers went from being tellers to sellers. Most banks recruited only young people who could grow up into their ways. Bankers morally, socially and financially administered each other, with young bankers having to account to superiors for their weekends, the dirt in their fingernails, the state of their own bank accounts and their personal prudence.
Bankers were professionals, with a calling, a type of person with cavalier twill suits and moral fibre whom you could identify from 50 yards. The job for life ended with a copper-fastened banking pension that would see you on in comfort.
Working for a bank is now precarious. Good bankers follow their contracts, are expected to not only hit their key performance indicators but exceed them to get a bonus and secure their footing. It is not about what kind of person you are, rather about the kind of things you are willing to do. Banks are struggling to attract bright young people to become the bankers of the future because they are in the habit of shafting their staff.
Bankers used to have strange relationship with their communities – like gardaí or GPs they knew too much about people to ever relax in a pub with their customers. They were being watched and they watched. They relaxed only in each other’s company. Now they are out in their community selling, hawking, coaxing, with the huge threat of machines replacing them. Many have the indignity of sitting behind strangely-shaped desks that express the bank’s brand ethos while patiently showing their customers these stupid and awkward machines that one imaginary day will replace them.
At the same time we keep trying to pretend banks are ordinary businesses, subject to the normal rules of capitalism with unbridled growth. This category error has led to the Central Bank’s warning of dire consequences of not offering bank executives bonuses. In the crisis, we discovered that our banks cannot fail, and so they are a one-way bet by the financial markets. We have to realise that these institutions are actually modern utilities – like the electricity and water networks.
While we cannot go back to the past, we probably need to think how we rehabilitate the hollowed-out profession of banking – reinvest trust and a long-term commitment to those who take on what should be the grim, austere work of counting money. This is a hard pill to bite when bankers are one of the last groups of people we can truly say horrible things about.
We also need to think about how big banking should be organised as part of the economy and as part of individuals’ lives. Should banks be simpler, less innovative beasts, limited in mission and reach into people’s lives? Sadly, the game is to swell them up again to shift the bailout on to their customers, with the inevitable crisis fatigue that goes with that.
“We need the moolah, you have it, so you’re going to give it to us, and when would that be?”
Aisling Tuite is a post-doctoral researcher at Waterford Institute of Technology