We should never have expected the SFO to bring banks to justice

Friends of former Barclays chief executive John Varley — I don’t mean ‘people who speak to the media on his behalf’, but rather people like me who have known him all our working lives and hold him in high regard — were relieved to hear he has been cleared of fraud charges relating to the bank’s 2008 capital raising from Qatar. Charges against Barclays itself were dropped last year but Varley’s co–defendants Roger Jenkins, Tom Kalaris and Richard Boath now face a retrial — so I’ll say no more for now about the Serious Fraud Office’s handling of this dossier. But it’s fair to ask, in general, how well our criminal justice system has dealt with the ramifications of the financial crisis.

The answer — at least according to the body of popular opinion, echoed by many politicians, that cries ‘lock up the bankers’ — is that it has largely failed and that the SFO, now led by former FBI prosecutor Lisa Osofsky, has repeatedly shown itself unfit for purpose. Varley was the only head of a major bank to face a jury. No one at RBS or HBoS was ever charged with a crime. Only in the matter of interest-rate rigging has the SFO nailed anyone at all: five individual traders for offences relating to Libor and four relating to Euribor.

But the truth is that popular opinion has always found it difficult to distinguish stupid decisions and delusional risk–taking from outright dishonesty. When banks behave badly, those strands are typically so inter-woven as to make it impossible to attribute individual blame, never mind (as the law asks) identify a ‘controlling mind’. In the ‘stupid’ and ‘delusional’ categories, what did most damage were strategic choices made by executives, endorsed by boards and unopposed by shareholders; but such collective folly fell short of legal definitions of criminal negligence and it was misguided to expect the law to provide remedies.

As for dishonesty, rate-rigging across global markets delivered ill-gotten gains to many participants, and guilty verdicts on a sample of them have arguably exploded the scandal — but it took a legal juggernaut several years and millions in court costs to achieve even that partial victory.