Criminalizing Banks…What is justice?

The news is full of the misdeeds, both proven and alleged, of an increasingly large number of multi-national banks in a range of areas- some market-related, others linked to regulation.

As we have written before, it is clear that banking regulators have embarked on a course of action that is intended to exact increasingly significant economic penalties from those targeted, as well as, more recently, forcing them to admit some form of criminal wrongdoing.

This has become more than an attritional “cost of doing business”, as the amounts now involved can easily wipe out a year or more’s profits; and one has the sense that regulators and government legal officers have a range of possible activities still to be comprehensively targeted, such as LIBOR, FX and commodities pricing.

And yet, with few exceptions (and those only at a low level), they have not gone after bank executives for either civil or criminal penalties. In the case of BNP Paribas, a number of executives have supposedly been forced out, but there is no evidence that they have suffered any material penalties. Of course, such outcomes do beg the question of whether regulators are trying to achieve a goal without having to resort to the courts and the need to meet a burden of proof. So, one does wonder what would happen if a bank actually resisted and sought its day in court, as some are now urging, or was willing to meet the costs incurred by its officers in defending themselves before a tribunal. Could this lead to retribution in the form of threatened loss of essential banking licences?

With a few obvious exceptions, such as the infamous BCCI, banks are not criminal enterprises. They are vulnerable to the malfeasance of individuals, even at a senior level; and to sins of omission (“turning a blind eye”) and of commission; as well as to the idiosyncrasies of government political sanctions and the conflicts between them (such as between the US and the EU, for example.) Yet they also perform essential utility-like functions without which no modern economy, nor global trade can function, so enforcement activity is inherently a balancing act to ensure that wrongdoing is appropriately punished and justice achieved, while essential functions are not compromised.

-The Awbury Team


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