‘£1m Isn’t Rich Anymore’: The Rise and Fall of Investment Banking
…Arguments about “casino” banking continue to rage: in the UK in 2011 the Vickers report recommended ring-fencing investment banking from retail operations, and in the US the Volcker Rule will prevent banks with retail operations from making the sort of risky proprietary investments that went so sour for National City Corp. What is clear is that the concept of the “bulge bracket” bank is under heavy scrutiny - the once-feted model that all those small US banks strained towards which said that bigger was always better, and that it was sensible for the same institution to handle your mortgage, your insurance needs, your speculative derivative investments and your share trading, while also dealing in commodities, advising on mergers and acquisitions and carrying out a host of other financial services. Now the likes of Barclays, RBS, Citigroup, BNP Paribas and a host of other names more usually associated with retail banking are left with hypertrophied, redundant investment banking operations that belong to a bygone age.
With increasing focus on those still brave enough to call themselves investment bankers, the story of these one-time titans of the markets has lurched from scandal to catastrophe. JPMorgan - previously aloof from the struggles of other banks - got tarnished by the inexplicable actions of the London Whale, a rogue trader at its proprietary investment office. The former Barclays boss Bob Diamond’s intransigence and lack of remorse marked him out as an avatar of the era of selfish capitalism. The London Interbank Offered Rate scandal in which Barclays was implicated - where traders manipulated one of the key interest rates to line their pockets - looks as if it will leave few in the industry untarnished, with further evidence of impropriety at HSBC and Standard Chartered.