British banks under fire

Two British banks have come under renewed fire this week. A UK parliamentary had a scathing report on HBOS and an independent report on Barclays Bank targeted the flawed culture at the bank.

HBOS, which went to ruin in the financial crisis, was a case of colossal mismanagement: bad lending, excessive dependence on short-term funds, poor controls. Just to give one statistic, the bank's loan to deposit ratio at one point was 198%- here in India, we get nervous even if the figure approaches 100%.

All this was made possible by poor regulatory oversight. It is hard to believe that a bank can be so badly managed right under the nose of regulators. To add insult to injury, its CEO sat for two years on the board of the Financial Services Authority.

The whole problem is that bankers can get away with their behaviour without any cost to themselves. One interesting recommendation is that, in future, bankers should face sanctions for the costs they impose on their firms and on society: