September 16 2018

According to this survey (taken this August), only 3% of people had a very positive view of financial services, with 57% having a very or somewhat negative view.  And all this 11 years after the run on Northern Rock and a decade after the Lehman’s bankruptcy, the bailout of RBS, the Lloyds takeover of HBoS and the disappearance of venerable institutions redolent of Britain’s sober manufacturing past, such as the Bradford & Bingley Building Society.  One might have thought that a decade would have been enough for people to forget what happened.  But like an itch that continues to be scratched, banks have, right up to the present day, provided many more examples justifying customers’ perennial exasperation with financial services providers: closure of branches, endless IT problems, the continuing PPI mis-selling saga, interest rates for savers still at rock bottom, mis-selling and mis-advice over pensions.  Even the much vaunted culture change programmes embarked on by many banks don’t seem to have changed perceptions, possibly because some of the sector’s leaders have not fully appreciated that this applies to them too.

The 10-year anniversary has brought out two figures from the past to give their take on where we are now and, in so doing, they managed to compliment themselves (without seeming to, unless that was the point of the exercise) on their past successes.  The first was Gordon Brown, the Prime Minister in charge when the crisis struck and famous for having claimed in Parliament that his efforts “saved the world” or its banks, anyway.  Certainly, the efforts of his government in autumn 2008 prevented the failure of the entire British banking system.  Would it be uncharitable to consider what responsibility his government (and the previous government in which he served as Chancellor) had for the state in which banks found themselves that autumn?  Had earlier warning signals perhaps been ignored by regulators?  Still, his claim that a more fractured system of political governance might make it harder for governments to co-operate should another financial meltdown occur is well made.  It is not just within financial institutions that silos can prevent those at the top seeing the full picture; the same can happen at governmental and regulatory levels too.

And so to Bob Diamond, never shy about arguing the case for aggressive investment banks and the need to take risk, who popped up on the radio last week to tell us that we should view Barclays (which did not get government funding) very differently to RBS, which did.  Possibly a touch premature, given that the SFO trial of senior Barclays executives in relation to Barclays’ capital raising that autumn is not due to start until January 2019.  (Even Diamond’s previous arch-critic, Lord Mandelson, after his change of heart, has weighed in echoing his criticism.)  Far from being concerned about a breakdown of trust between governments (Brown’s concern) or, indeed, trust in banking, let alone the culture at Barclays or other banks in the period leading up to the crash, Diamond thinks that the changes made in the last decade have made banks “too risk averse”, that without risk, banks won’t lend, the economy won’t grow.

Both men have a point.  But they miss something which has not been much canvassed in the reams of commentary devoted to what happened a decade ago.  Regardless of how well risks are understood, regardless of how co-operative governments and regulators are, regardless of how good the rules are, regardless of how many wonderful AI developed risk management systems are used, there will never be a perfect financial system.  Or a perfect regulatory system.  Problems will always arise.  And there will be warning signs – about people, about institutions, about certain types of business.  They may not be obvious or easy to read.  As the haystack gets bigger, trying to find the needle in it becomes ever harder.  Identifying what needs to be followed up and what can be ignored takes skill and experience.  Sensing what might become serious and getting people to act before it does so takes persistence.  No-one wants to be a Cassandra, endlessly forecasting doom. Even fewer want to listen to her.

Being prepared for the next big meltdown is necessary.  But just as much effort – rather more, in fact – needs to be focused on listening to – and acting on – those warning signs, to catching problems (whether mistakes, incompetence or deliberate wrongdoing) early, when they are small, when they can be contained and resolved without too much pain or collateral damage, when they can become learning opportunities for all rather than crises to be managed.  Problems, however small, don’t just need fixing then forgetting.  They also tell you a story – about the institution, about the people in it, about how business is done.  If we are to avoid the inevitable recitation, after every scandal, of the numerous opportunities when the issue might have been identified, acted on and stopped – or mitigated, it is a story which needs to be listened to.

After all, Cassandra turned out to be right.

June 21 2018

”The real scandal is not that no-one knows.  It’s that everyone knows.”

Not said, as you might imagine, about the events at Gosport War Memorial Hospital but about the childrens heart unit at the Bristol Royal Infirmary 30 years ago.  And yet, as applicable today as then, despite all the lessons learned (or not) over the years.

There are many aspects of this which will be wearily familiar to those involved in previous NHS scandals (Morecambe Bay, Stafford) and those in other sectors:-

– warnings or concerns raised by junior staff were ignored or hidden away

– senior staff and colleagues were aware but turned a blind eye

– complainants, both internal and external, were treated as troublemakers

– a tendency to close ranks against those raising concerns

– missed opportunities: all too many moments when something could have been said, should have been said but was left unsaid

– retaliation (or threats of it) against staff.  They were warned that if people continued to speak out, it could undermine the good work being done.  Some staff highlighting concerns faced “a certain amount of ostracisation”

– a culture of deference: both to senior staff and to the institution

– viewing the protection of the institution’s perceived reputation as more important than dealing with its failings.

Sound familiar?  The fact that an institution consistently admired by the public could develop a culture quite as bad and – in its effects on people – worse than in less admired sectors (such as banking or the press) shows how widespread these problems are.  Unsurprising really.  Most people are not heroes and find it easier to take their cues from those around them.

But the most shocking (and, so far, least commented on) aspect of this story is that even 12 different sorts of investigations over 27 years failed to uncover the full facts or lead to effective action.  How can this be?  Well, different bodies with different agendas, powers, without access to all the information and sometimes lacking the relevant skillset do not result in the ideal investigative set up.  But in truth, institutions – like most people – do not really want to know about their failings.

So it is all too easy – and sometimes unfair – to criticise individuals for not speaking up (see here a nurse describe her shame at not having done more) and to think that training them to have the courage to do so is all that’s needed.  Necessary as this may be, it places too great a burden on them.   And lets others off the hook.

Too often the focus is on those who knew but did nothing and on the lessons to be learned but not on the critical bit in the middle – the integrity and thoroughness of the investigation.  Without it no-one will come forward and “lessons learned” will be seen as lessons which are never learned by those who need to do so.

“Freedom to speak” guardians (the NHS’s most recent attempt to create a better culture) are a nice idea.  But what, really, can they do?  What those who raise concerns want is not just the freedom to speak but the knowledge that action will be taken once they have spoken.

What they need above all are trustworthy, fearless, independent and tenacious investigators who will really listen to them and investigate properly.  And an institution humble enough from the top down to realise – and really mean it this time – that it is only by understanding its failings and mistakes and learning from them that it can improve for the benefit of those it is there to serve.

Only then can individuals have the confidence to know that speaking up is not just the right – but the professional – thing to do.  And that it will not be in vain.

Photo by Luis Melendez on Unsplash

May 14 2018

Delighted to have contributed to – and be quoted in – this interesting feature article in this week’s Law Gazette on the various new ways in which law enforcement, regulators and government agencies are trying to crack down on the UK’s most common crime – fraud.