In the last fortnight we have seen the banks making the news for all the wrong reasons: excessive pay, tax avoidance schemes, manipulation of interest rates, mis-selling of complex financial products to people and firms who couldn’t possibly understand them, and massive failure of computer systems. That last was an unfortunate matter, the others all appear to be indicators of a pervasive culture of casual corruption.
We are all agreed that something needs to be done. Indeed, pretty much everyone says that the culture in banking needs fundamentally to change. There is a call for a public inquiry. This, I think, is a mistake.
It’s not that I think the banks are right, or that nothing needs to change. I just don’t think that a public inquiry will get to the bottom of things and facilitate the changes needed. 
We already know what happened. On LIBOR, the FSA report is clear, and horrifyingly explicit about the arrogance and lack of conscience of the Barclays bankers involved in rigging LIBOR. Various other reports have come out about the mis-selling and the tax avoidance. And we have a lot of information about the huge levels of pay, and the bonuses that appear to be paid regardless of performance.
It’s not only Barclays at fault. Nor just the UK banking system. The LIBOR scandal involves other banks, and is also being investigated elsewhere. The Financial Times yesterday mentioned: the FSA report, the Treasury Select Committee, regulatory inquiries in ten countries over three continents, an inquiry by the EU Competition authorities, and the work being done by the US Department of Justice and the FBI. It’s not that we are going to be short of information on this.
A public inquiry will not provide any further benefit. Indeed, it is likely to delay any reform of the system, as nothing would be put into place until it had finished. It would cost a lot of money. And it would not last the ‘one year’ that Ed Miliband is suggesting – banking is too complex for that. Indeed, in my view banking is too complex for a public inquiry. Leveson has been brilliant in exposing hacking and the rotten culture surrounding tabloid journalism. But hacking is easy to understand; banking isn’t. It will serve the public interest better if we let the various experts and regulators investigate these matters, and then make a full public report, with recommendations that are implemented quickly and in full.
We need a culture change in the banks, to return trust to the system. This must start at the top, as an organisation’s culture and attitudes are driven by the signals sent from the boardroom and the top executives. Bob Diamond’s letter to the Chairman of the Treasury Committee explained away the bank’s two efforts at rigging LIBOR (firstly to raise it and then to lower it) as being “wholly unrelated”. This is a deliberately naïve statement that misses the point. Any rigging of the system reflects the underlying values pertaining in the bank that he heads, in the department that he ran for many years. An aggressive, results-driven organisation is prone to veering close to the edges of acceptability – and in this case, way beyond those limits – unless a clear steer is given as to where the line should be drawn and what is morally acceptable.
As Bob Diamond himself said, “culture is how people behave when no-one is watching”. Well, we now know how they were behaving, and we hate it.
I spoke to a colleague of mine who works in change leadership, and asked him how this could be effected. He gave me several points to consider. Fundamentally, change only happens if those within the organisation see the need for change. If they don’t see it as urgent, it won't take place. If the organisation has been successful (which in this case means profitable) through undertaking the flawed behaviour, then they won’t want to change. Likewise, if individuals are being rewarded for the results they are achieving, they will keep on doing what they have always done. And finally, in this case fundamental culture change is likely to necessitate change at the top – a new CEO - both as a symbol that things will be different in the future, and in order to set the new path.
Action needs to be taken, quickly, to restore trust in a system that many now perceive as morally bankrupt. Bob Diamond in his lecture last year said we should, “judge the success of … banks on the basis of broader measures and values”. In that, he was right.
 Late addendum. I wrote this entry after having been asked specifically if a Leveson-type inquiry was appropriate, and that was the focus of my comments. But as I said above, the Treasury Select Committee is already involved. I'm not suggesting that that is unnecessary - just that we don't need yet another body to look at it as well.