Ethics and the City, bankers' tales

Last Modified: 19 Jun 2008
By: John Sparks

On the day the chancellor outlines plans to strengthen banking regulation John Sparks talks off the record to banking insiders

Under the proposals the Bank of England would have a legal obligation to ensure financial stability.

It's a tacit admission that the banking regulator, the Financial Services Authority, which has been severely criticised for failing to act soon enough in the case of Northern Rock, is not up to the job of dealing with a collapsing bank.

But the FSA will still be in charge of the day-to-day regulation of the City and according to the testimony of the banking insiders who've spoken exclusively to Channel 4 News, there are serious questions about whether it's really robust enough.

'You cannot be ethical in this job'

One month after the boss of the Financial Services Authority, Hector Sants, told Channel 4 News: "On bankers' bonuses, I would agree with the point that fear and greed is a factor in leading us to where we are," Channel 4 News talks behind the scenes with a variety of former and current city employees.

'There's a culture, if you're making a lot of money, you're a god; you're untouchable.'
Ex-head of internal auditing

A senior internal auditor, still working at a large investment bank told Channel 4 News: "It is a struggle to do the right thing. You have to accept what goes on.

I have a mortgage, responsibilities. You cannot be ethical in this job. It is like that for all of us."

A former head of internal auditing - also from a large investment bank, told the programme of his decision to quit.

"It came to the point where I didn't feel comfortable with what was going on. Being compromised the whole of the time.

"When it comes to the point when you're asked to change a report to such an extent that it is not your report, I couldn't stomach it any more. It was time to call it a day. If something had gone wrong, I could have been held accountable."

Asked how effective the FSA were the same former head of internal auditing said: "Well if you are there for two or three days looking at an area, that internal auditors would spend three to six months looking at, you're not going to find much."

Asked if one would ever tell the regulator about any problems found, the response was:

"No. You don't do that. You don't bite the hand that feeds you. You just don't do that. The way we are briefed to deal with the FSA is to answer their questions but you don't volunteer information."

The same anonymous ex-head of internal auditing added: "There's a culture, if you're making a lot of money, you're a god; you're untouchable. So you couldn't really criticise. If you did, you'd be on the wrong side of the organisation."

A former investment banker (financial structurer) told the programme: "The system encourages this kind of - when the money's there - we'll just go out and lend it: lend it: lend it".

The same voice told us: "I think it must have been around the middle of 2003 when my boss at the time - head of the department - walked around each desk with a piece of paper in his hand, and it was an email he had had from his boss.

"It included the phrase 'we are facing a wall of liquidity': huge amount of money, looking for things to buy."