HBOS whistleblower hits out at bank regulators
The Libor rate-rigging scandal that is currently engulfing the banking sector has led to further condemnation of the behaviour of bankers and calls for criminal prosecutions for those involved.
Among the most vocal is the man who became known as the HBOS whistleblower.
"The people of this country are totally fed up and angry with the continuous greed, dishonesty and wrongdoing of our banks," says Paul Moore, who was head of group regulatory risk at the bank until 2004.
He is calling for "the fullest, most forensic, most transparent 'people's public inquiry'" into the behaviour of banks, and has launched a lobbying group, the New Wilberforce Alliance, to lead a campaign for such an inquiry.
Prime Minister David Cameron has announced a full parliamentary inquiry of the banking sector, as well as a narrower inquiry specifically into the Libor market, but Mr Moore believes this does not go far enough.
"Numerous enforcement actions - criminal, regulatory and civil - should have been and should be taken, including in relation to Barclays Libor fixing," he says.
Anger that taxpayers' money was used to bail out "greedy" bankers was further fuelled when scandals emerged involving the mis-selling of payment protection insurance (PPI), the mis-selling of interest rate hedging products to small businesses, and most recently the manipulation of the Libor inter-bank rate.
Mr Moore was dismissed from HBOS in 2004 after warning that the bank was taking excessive risks. But he had signed a six-figure settlement with the bank, conditional on him never speaking about the warnings he had given.
Four years later HBOS came perilously close to bankruptcy and was taken over by Lloyds Banking Group, leading Mr Moore to break his silence.
He says it is hard to know where to begin when looking at what went wrong with the UK's banking sector. "The list is just so long."
But he is adamant about one thing. "The regulators and other enforcement agencies, for example the Serious Fraud Office, have totally failed us in holding people who have committed wrongdoing to account."
The SFO declined to comment, while the Financial Services Authority (FSA) says it has taken "tough actions" and was prepared to challenge the banks.
Former City correspondent and current BBC presenter Peter Day has pointed to the Big Bang of 1986, which marked the deregulation of the financial markets, as a turning point for the City of London.
So what has been the problem with regulation since then?
Again, Mr Moore says there are numerous reasons for the failure of regulators - the Bank of England and the Financial Services Authority (FSA) - to hold people to account.
There has been inadequate investment in investigation and enforcement resources, according to Mr Moore. Moreover there has been "no will and energy" to hold people to account.
"Regulators and enforcement agencies are too cosy with the firms they supervise," he says. "There are loads of revolving doors between the regulators and the regulated."
Plus, he says, there have been no personal consequences for wrong doing - no jail, fines, public censure or banning - so, therefore no deterrents.
But a spokesman for the FSA said: "The FSA has significantly strengthened its enforcement team in recent years - and a string of tough actions including jail sentences for insider dealers and large fines show the impact of our work.
"Banking regulation has been radically changed with much more intensive supervision of the largest firms. Our recent appearance at the Treasury Select Committee demonstrated that we are prepared to challenge the boards of major banks."
Mr Moore is not alone in his criticism of regulators. Richard Werner, professor of international banking at Southampton Management School, agrees.
"The key to this is the regulators never even tried to regulate many aspects of banking. In many ways we can't even blame the bankers because they were told to go out and make maximum profits, and don't even think about anything else," he says.
Prof Werner believes UK regulators should have told the banks to lend more responsibly, rather than focusing on more dangerous loans to the financial sector and hedge funds.
He points to the difference between "predatory" banks in the UK, who bankrupted many small businesses by selling them inappropriate financial products, and local banks in Germany who lend to small firms to help them grow.
'Pay regulators more'
So, what can be done to improve the system? According to Mr Moore, "root and branch reform" is needed.
But another part of his solution may surprise some people.
"We really do have to make being a regulator one of the most prestigious jobs in the country, not just a stepping stone for good people from which they can triple their salaries," he proposes.
"[Currently] good ones leave and double their salaries or more. Bad ones stay."
Stronger penalties are needed too, and the enforcement of those penalties.
Mr Moore, a trained barrister, points out that the reckless mis-selling of financial products, including PPI, is a criminal offence under section 397 of the Financial Services and Markets Act 2000.
"We put people in prison for stealing a water bottle when they get carried away in a riot but we let top directors of banks, [who are] paid millions, get away with putting compensation provisions on their balance sheets and monetising their morality and illegality."
But the outlook for the UK is "promising", says Prof Werner. "There is now definitely greater awareness that the Bank of England should have done more," he says.
"In Britain, more than other countries, there is recognition that reform of the regulatory system is needed.
"The FSA will be broken up, and there will be more regulation especially concerning the banking sector."