WHY is there now such an almighty fuss (now) over banks mistreating their customers?

In this latest case, banks are cancelling accounts, including (notoriously) that of Nigel Farage. As a result, the CEO of NatWest, Dame Alison Rose, has lost her job. But what does it actually take for bankers to suffer some retribution for their high-handed behaviour?

The answer is simple, dear reader. It is only when the bankers are stupid enough to let their actions affect the political class – as opposed to ordinary mortals – that anything happens by way of justice.

When the rest of us have loans called in abruptly and our painfully acquired businesses sold from under us, the regulatory authorities do nothing. When banks forge documentation to allow them to impose outrageous new charges, the regulators say it is impossible to prove – despite thousands of cases on record.

And when criminally corrupt bank officials defraud business customers, company boards have been known to cover up the egregious behaviour in order to protect share prices. Again, both regulators and the fraud authorities have been sloth-like to respond.

Yet woe betide a bank that forgets the golden rule: “Don’t upset the politicians personally.” How did NatWest and its Coutts subsidiary get things so wrong? Answer: arrogance. Sheer bloody arrogance.

First up, some background. When I was an SNP MP, I was chair of the all-party group on fair business banking. Essentially, it existed to champion the cause of the small business customers of the big banks who had effectively screwed their customers out of (we estimated) some £100 billion pounds worth of assets, in the period after the 2008 financial crash. Yes, that’s ONE HUNDRED BILLION. T

he result was the wrecking of the small business sector, slow economic growth and the plummeting of productivity levels (who was left to invest?).

This raid on the pockets of tens of thousands of hard-working folk was an outrage. Not a few of those affected took their own lives. Yet despite appeals to the regulators – including Andrew Bailey, since elevated to run the Bank of England – nothing happened.

I managed to secure the odd debate in Parliament, at which MPs of all parties trotted out case history after case history. But nobody in government listened.

I remonstrated with two different Chancellors of the Exchequer. I even made an accusatory film with the great documentary maker Samir Mehanovic (“Spank the Banker” available on Vimeo). But the powers that be were more concerned with protecting the banks than providing justice.

Your reaction may be to argue that – especially in rocky economic times – small business always go bust and banks will, of necessity, recoup their losses. But that is not what happened here.

In the run-up to 2008, banks borrowed from each other wholesale in order to gamble in the so-called derivatives market. This was not ordinary banking – taking deposits and lending to businesses to create jobs – it was insane risk-taking prompted by lust for personal bonuses. When the whole house of cards collapsed, the Western banking system trembled on the brink and had to be bailed out. RBS and HBOS-Lloyds had to be nationalised.

Precisely in order to rebuild their profits and pay off their new debts, the banks embarked on a strategy of squeezing their small business customers. True, the crisis in the banking sector had led to a temporary global economic downturn. That obviously created short-term problems even for perfectly viable small businesses.

But rather than help those businesses weather the storm, the big banks used the occasion to force small firms into liquidation deliberately in order to seize their assets. RBS even had a special unit – the Global Restructuring Group – dedicating to asset stripping its small business customers.

Later, the Financial Conduct Authority produced a report into the GRG scandal – but declined to take any mitigating action because ordering compensation would have destroyed RBS itself. Too big to fail, as they say. But also, too big to prosecute.

The scandal at HBOS-Lloyds was even bigger. The unit in charge of small business lending went rogue, with one senior manager going to jail. Customers were inveigled into taking loans – very complicated loans – that pushed the small businesses into technical bankruptcy.

The distressed assets were then sold off below value to other members of the gang. Concerns were raised by a whistleblower to the HBOS-Lloyds senior management and board and the all-party group was forced to ask what senior management and the board knew and when.

Had it not been for the dogged pursuit of the criminals by elected Thames Valley police commissioner Anthony Stansfeld, the affair would never have come to light. Some financial compensation was eventually offered by Lloyds – but too little, too grudgingly and not till many lives had been destroyed.

The restitution of the banking system after the 2008 meltdown was based on robbing blind Britain’s small business sector. This goes a long way to explaining the UK’s poor economic performance since then. And the suppressed anger that led to Brexit.

As for the true culprits, few suffered. RBS changed its name to NatWest in the hope of shedding its reputation for taking bad risks, gambling with other folk’s money and using its small business customer base as a cash cow. Note: there was also a deliberate anti-Scottish element to this rebranding. But the bank never changed it commercial spots.

It is therefore no surprise that it has been caught out again in the Farage affair. In passing: when I left Parliament, RBS (as was) quietly offered to fund the work of the all-party group on fair banking.

I wonder why?

Now Farage has seen an opportunity to rebrand himself as the populist champion of those who have suffered at the hands of the banking system.

I would not trust Mr Farage as far as I could throw him. But there is a lesson here. In the aftermath of the 2008 banking crisis, the Tory government introduced a series of legal changes to force the banks to be more responsible. They also changed the law to make individual bankers legally accountable for future bad behaviour. Subsequently, much of these reforms have been quietly repealed.

One of the bits of reform still on the books involves banks having to take tighter precautions against money laundering by criminals, terrorists and billionaires attempting to avoid taxation. Not that the legislation is effective.

In 2021, NatWest was fined £265m for failing to stop money laundering through its accounts. Then CEO Rose parroted in response:

“NatWest takes its responsibility to prevent and detect financial crime extremely seriously.”

But all it did was to de-bank anyone it thought might embarrass the bank further (eg Nigel Farage) rather than actually ensure that future money-laundering was impossible.