Chris Blackhurst: We should have let banks go to the wall. They don’t care about our wellbeing

Have attitudes in the City changed? It’s a question I’m asked a lot by people outside the Square Mile.

They seem to raise it in hope, more than anything else. The answer I give is “yes and no.” That may seem typically fudge-like but it also happens to be accurate.

On some levels, the City is different: banks are weighed down with compliance and procedure: there’s far greater attention being paid to recruitment at the top level; bonuses are increasingly being paid in shares; firms are anxious to be seen to be doing the right thing.

They’re pursuing pretty much zero tolerance to anyone caught crossing a line. Humility and maintaining a low profile are the orders of the day.

So far so good. But deep down, have attitudes really shifted, has the culture altered? Here, I have to report a resounding “no”. We’ve had numerous examples of bad practice, including instances of mis-selling and manipulation of rates. Right now, the Co-op Bank debacle continues and there are claims that RBS pushed struggling businesses to the wall so it could take over their properties on the cheap. Meanwhile, no less a figure than Justin Welby, the Archbishop of Canterbury, has felt moved to intervene, and join with Lord Lawson, the former Tory chancellor, and other senior peers, to try to toughen up the Government’s banking reform bill.

Here’s another scandal to add to the mix. A friend contacted me. He was outraged by the behaviour of an investment bank. He’d approached it with a proposal – I can’t go into detail but, suffice to say, he was setting up a new business and was looking to forge a lasting relationship with a bank. My friend and his partners are not slouches – they come with established records, of the sort that would cause anyone in finance to nod in recognition and want them as clients.

My pal and the bank got on well. Then they quoted how much they would charge for their services. When he gasped, and queried the price, he was told: “We’re too big to fail.” In other words, by dealing with them, his money was safe – they were guaranteed by dint of relying on a future government bail-out not to go under – and therefore he should pay more.

It’s unclear how much the bank is imbursing the Government for this explicit insurance policy – presumably nothing, but there’s no doubt if they hit a crisis, they expect the taxpayer to cough up.

I confess to not believing him. I was so shocked as to assume he was having me on. But when I quizzed him, he remained solid. I played a bit of a guessing game as to the identity of the bank, but he was having none of that – he did not want people thinking their conversations with him would be relayed to the press.

There was no doubt in my mind it was true. He had no reason to call me; he was gaining nothing by making up such a tale.

In which case, I must put up my hand to naivety. When Mervyn King banged on about “moral hazard” I tended to scoff at the Bank of England Governor. I thought the cerebral, unworldly academic in him had won through, that Mervyn was finding conspiracy and deliberate, cynical, calculated action when there was none. I did not suppose that banks felt able to chase greater profits because they knew the authorities would not let them collapse.

I know, I know. I was a fool, a total innocent where bankers and morality are concerned. I should have realised: that to give a bank even a sniff of making extra profit is enough; that pretty much everything that is put in their way can be turned on its head and made into an opportunity.

Mervyn was right all along. We should have let banks go to the wall, rather than save them. In our desire to shore up the system we’ve created monsters that now feel able to exploit our goodwill, which do not care two hoots for us or the overall well-being of society.

The arrogance is breath-taking. Unfortunately, it’s all too indicative of a City that in the past has behaved as if it’s a separate country, aloof from events that affect the rest of us, unable to see beyond securing the next quarterly earnings rise and that all-important bonus. It seems that stance still prevails. So “yes”, coupled, sadly, with a resounding “no” is the right answer.