Justin is a senior banker, specialising in mergers and acquisitions, at a big investment bank in
I am engaged in trying to understand the culture of the
Last week the
But seeking an insight to the City's problems is a thankless task. The terminology is baffling; organisations thrive on opacity; and City insiders are paranoid about talking to the media. Many people insist on anonymity and demand to see quotes, or like Justin - which is not his real name - they want both.
"The City is the equivalent of
Justin startles me by extending his Venetian analogy. If the City is
A few days later, I meet three members of a City-based book club - a partner in one of the big four accountancy firms, a partner in a law firm and a senior analyst at an investment bank. They are thoughtful, friendly, articulate. They accept there are many legitimate criticisms of the City.
The analyst - all three have requested anonymity - rejects my assertion that the City is hermetically sealed from outsiders and almost deliberately opaque. With a comment that underlines the difficulty facing the BSC, he says: "You have to be careful when you refer to 'the City'. The City doesn't really exist. It's a lot less homogeneous than it used to be. There's no trade body, there's no single profession, the regulators have been fairly fragmented, historically different banks did different things, and the client base is all different."
He says banks are now too big. "Most banks are a series of silos," he says. "There's a fixed-income [bonds] business, there's an equities [company shares] business, there's an advisory business, there's a fund management business, and they all operate with different regulators, different Chinese walls, different operational requirements. In theory there's a synergy in having them all together, but in practice they're quite different institutions."
He says the multi-functional banks which have emerged since the City was deregulated in 1986 - in the so-called Big Bang - are impossibly complex. "How could one person understand a big, sophisticated international investment bank? It's almost impossible . . . There are so many complicated things driving the valuation [of the financial instruments] that no one can really understand what goes on, and the speed of trading makes it potentially very dangerous."
My most worrying encounter is with a derivatives trader who trades interest rate futures. He insists behaviour is as bad as ever, supervision as lax and, with high-frequency trading, the market even more unstable than it was in 2007-08. "There is no morality in the City," he tells me. "There is no justice, no law, it's ruled by Billy the Quid, it's a free-for-all."
The trader says misbehaviour is endemic. "If you're in an environment where misbehaviour is taking place, it's accepted. There is an ongoing manipulation of interest rate futures on a scale much larger than Libor. We all know it's going on, we see it every day, we've reported it and it's been brushed under the carpet."
Critics of the regulators say they have difficulty dealing on equal terms with highly paid City professionals. There is also a risk that staff, who tend to earn a lot less than the people they are supposed to be regulating, will be poached, especially at a time when in-house compliance officers are multiplying. This need to show they can compete on level terms may be why the FCA's office in
I am here to meet
He is now attempting a fresh beginning for bank regulation. "A real breakdown in trust has occurred," Adamson says. He accepts the regulators were "asleep at the wheel". "There was so much froth in the financial system that we didn't spot where the froth was leading too. Financial engineering, over-leverage, a lack of capital in the system, no real liquidity, banks taking on too much risk. In the
Can we now be confident the regulator is awake at the wheel? "There have been several key changes," says Adamson. "The regulator has been split into two. The PRA looks at individual firms' financial robustness . . . The Bank of
"The other key thing that's changed is that we now put the interests of the consumer at the heart of what we do. Thirdly, we've changed culturally. We are much more forward-looking and pre-emptive now."
The light-touch regulation beloved of the Blair-Brown governments has been abandoned, but Adamson is wary of going too far. "It's a real issue how to get the balance right," he admits, "because what we don't want to do is to be so intrusive that we stop markets developing."
He says the stability of the financial system can never be guaranteed. "What we can do is reduce the risk of something going wrong, but we can't eliminate the risk. If we did try to eliminate the risk with ever tougher regulation, the costs would be too high."
I ask whether he believes the culture in the City has changed since the crash. "I think it's changing," he says. "That's the biggest issue of all - to change both the corporate culture and individual attitudes . . . We think very strongly that in order for less bad things to happen in the future, the culture and behaviour in the firms have to support doing the right thing. And that's difficult to change."
Multi-functional banks have become impossibly complex since deregulation in 1986, says a senior investment bank analyst
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