By David Milliken and Huw Jones
LONDON, June 29 Bank of England Governor Mervyn
King launched an angry attack on British banking culture on
Friday, saying something had gone very wrong with an industry
which he derided for resorting to "deceitful" methods to make
King, the country's most powerful monetary official, said a
a fundamental overhaul was needed for a sector that is reeling
from a string of financial scandals.
The banking industry is one of the largest cogs in Britain's
economy and has thrived over the past decades in a climate free
Protecting it has often caused major clashes between Britain
and it European Union partners.
Britain's Barclays, a major international player,
found itself in the firing line this week after U.S. and British
authorities fined it $450 million for manipulating the rate at
which banks lend to each other overnight. More banks are
expected to be drawn in.
The row has angered voters and prompted politicians across
the political spectrum to attack what many see as a culture of
greed in a country struggling to revive the shrinking economy.
Speaking after a week of stinging revelations, King said
problems ranged from "shoddy treatment of customers" to
"deceitful manipulation of one of the most important interest
rates", as well as excessive salaries.
"What I hope is that everyone now understands that something
went very wrong with the UK banking industry and we need to put
it right. ... We need a real change in the culture of the
industry," he said in a news conference presenting the central
bank's financial stability report.
It is an awkward moment for Prime Minister David Cameron,
accused by critics of being out of touch with the hardships of
ordinary people - an image reinforced during an intense public
inquiry into his government's cozy links to the media elite.
Some politicians called on the government to set up a
similar inquiry -- or investigation -- into banks as the row
engulfing the financial community threatened to spill over into
a wider political scene.
Britain's Financial Services Authority said it had settled
with four banks - Barclays, RBS, HSBC and Lloyds
- after finding evidence they mis-sold products to
protect small businesses against a rise in interest rates.
Under pressure to act decisively, Cameron said those
breaking the rules of corporate responsibility must "face the
consequences" but made no policy proposals.
"I think we know what needs to be done. The most important
thing people want to see is a really concrete set of actions
that will help change the culture," he said in Brussels.
"People want to see real accountability for what has
happened. Where people have broken the rules they should face
The overnight lending -- or Libor -- revelations left
Barclays' American boss Bob Diamond fighting for his job, but
are only the latest in a long line of events that have roused
British public ire against bankers.
Britons are already struggling with below-inflation pay
rises have been infuriated by government-funded bailouts for
banks that paid bonuses worth many times the average British
salary, and by mis-selling of some insurance products.
Several members of parliament called for a public inquiry -
a risky step for a government already under fire after a barrage
of excruciating relevations made in a year of public hearings
following last year's phone-hacking scandal.
Asked whether he was in favour of the move, Business
Secretary Vince Cable said he did not have "strong objections".
"The priority is surely to take action in the areas where we
know there's a problem," he said. King had earlier said he did
not think an inquiry was necessary.
The financial industry, which employs around 1.4 million
people in Britain, had been a major tax source before the
financial crisis but the government had to bail out several big
banks with tens of billions of pounds.
Speaking alongside King and Turner, Andrew Bailey, BoE
executive director and head of the bank regulation unit, urged
bank boards to be aware of potential dangers.
"If we see a fundamental breakdown of trust (in financial
institutions) then the boards of these institutions have to
recognise that trust has to be got back, and they have to think
very hard about how this is to be done," he told reporters.