‘Unbelievable!!!’ was the striking line in an email I received earlier this week from a trusted contact. It referenced a reported request by John Cridland, director general of the Confederation of British Industry, for banks to be protected from lawsuits related to the sale of products linked to Libor. ‘It would be a dangerous precedent if banks were to be held responsible for products sold that related to Libor,’ Cridland wrote in The Times.
As the Gazette previously reported, even though the general effect of Libor-fixing was probably to depress rates, it is market movements triggering ‘opt-in’ and ‘opt-out’ provisions that are to blame.
I find Cridland’s call staggering on two levels. First, politically, there will be many in his own business constituency whose interests would be harmed by such a move. And in fact the email I received came from one of the small and medium-sized business owners whose peers form the backbone to the CBI’s membership.
Secondly, and this may be the ‘unbelievable’ part for Gazette readers, is it honestly his contention that a business that has suffered loss should have no redress? That should strike anyone as a civil law miscarriage of justice, if allowed.
Finding a way to protect banks from such suits, out of fear that they are unaffordable, amounts nothing less than an extra tax on businesses to prop up the banks concerned. In the case of one bank alone, Cridland’s ‘get out of this free’ card would come at a rumoured $6bn cost to businesses.
If Cridland’s proposal really were one that would, albeit through a gross unfairness, stabilise a reformed and penitent banking system, it would be a stronger one. However, the complaints that my ‘unbelievable!!!’ contact and his peers have about bank conduct are ongoing – not ancient history.
The CBI’s leadership seems to have been ‘captured’ by the banks on this issue. How could that have happened? Well, maybe the depiction of defendant organisations as ‘victims’ pedaled by government is now infecting the CBI’s view of financial services litigation.
Eduardo Reyes is Gazette features editor
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