Just when you thought the banks might have learned their lesson, yet another scandal emerges which underlines the need for root and branch reform of the banking industry. The scandal over the fixing of LIBOR interest rates, the rate at which banks lend money to one another and use to calculate interest charges to their business customers, is the latest crisis to rock this beleaguered industry.
Two weeks ago I took part in a debate in parliament which explored another banking scandal - how the banks bounced their business customers into accepting complicated "swap agreements" which were supposed to cap their interest charges but instead cost many businesses hundreds of thousands or even millions of pounds because it turned out the product they had been sold was not an insurance policy at all but instead a risky bet on the financial markets.
Later this year the government will set out its proposals for a new Banking Bill which aims to sort out some of these problems and it comes not a moment too soon. For too long, the banks appear to have carried on regardless, awarding themselves big bonuses despite being a loss making, down the pan industry. The big salaries at the top and so called "golden parachute" deals which reward failure have been out of control. They are not driven by market forces but instead by a high pay culture that is fueled by head hunter agencies who are paid commission.
I think we now need to look at breaking up the major banks to increase competition. There are too few banks and the ones we have are seen as too big to fail, so we are expected to bail them out in order to avert catastrophe. We need a system where we can let a bank go bust without there being a major crisis otherwise there is no incentive for them to exercise care and caution.
We should also separate the investment banking arms which speculate on world financial markets from the retail banking operations which manage funds for businesses and individuals because there has clearly been a serious conflict of interest in some cases and we also need a fundamental review of regulation of the banking sector.
Finally we need to look at the way banks behave when businesses experience difficulties and rebalance the law away from money lenders by strengthening the rights of businesses. I have argued that we should require banks to obtain a Possession Order from the courts before being allowed to seize and sell assets and the courts should also have the power to grant a moratorium to protects a business from lenders and give them the space and time they need to restructure or refinance their operations when things go wrong.
George Eustice can be contacted at email@example.com or 1 Trevenson Street, Camborne, Cornwall TR14 8JD or by telephone on 020 72197032.