How The Banks Gamed The Watchdogs

HSBC got hit with a big fine from the PRA today for failing to protect customer deposits.

That sounds about as serious as it could be.

What’s the actual impact on the bank? Well, since it is valued on the stock market at £120 billion, the answer must be: nothing really.

Here’s how it goes: bank gets fined. Regulator talks tough. Press acts outraged.

Then everyone carries on as before.

HSBC shares rose today, a sign that the market doesn’t care about the bank’s supposedly egregious acts.

In theory, the bad PR that comes from the fine is supposed to be part of the punishment.

In reality, it is almost like the financial services sector has gamed the system by turning a punishment from watchdogs into normality.

The fines – HSBC’s today is £57 million – are barely a fraction of profits. It’s just the price of doing business, like a subscription fee to a website.

There is no suggestion the CEO will see his bonus culled for this failure.

No real chance that customers will move their accounts en masse in disgust.

So the regulator, dancing around as if it has won, looks slightly daft.

It needs to up its game. If bank fines were much larger – a billion quid say – well, that’s real money even for HSBC and co.

The present punishments are little more than two hours on the naughty step before everyone sits down together for dinner.

It’s not even a PR victory.