The banking industry has seemingly never heard the old cliche of the punishment fitting the crime. On Wednesday, US and UK banking regulators issued fines totalling $5.8 billion to six banks for their roles in rigging benchmark interest rates.
Five of those banks — Citigroup Inc, JPMorgan Chase & Co, Barclays Plc, UBS AG and Royal Bank of Scotland — also pleaded guilty to crimes including forex and interest-rate manipulation charges.
Being labelled a felon and fined more than the gross domestic product of some countries may sound like a harsh punishment, but consider the market’s reaction: There wasn’t any. Global markets did not flinch.
Stock prices barely flickered. In short, no one cared that some of the world’s biggest banks blatantly conspired to rob others of untold billions.
This both sets a precedent and sends a message: If you commit the crime, do not worry about doing any time, as long as you are willing to pay a nominal fee. The focus instead should have been be on restitution to those who lost money due to the banks’ actions.
Determining who was hurt and how much they should be compensated would have taken years longer, boosted lawyers’ billable hours and deprived regulators of headlines, suggesting they actually did their job.
But the added cost to the banks may actually make them think twice about doing this again. However, no one of consequence seemed interested in that. Instead of letting the world know that those responsible for the global financial meltdown will be punished, the opposite has happened. Banks that used to be “too-big-to-fail” are “too-big-to-be-touched”.
