I say this as an outsider to the industry, but the 'large' £290m penalty appears to be a joke and the media are either complicit or too thick to realise. Annual profits for Barclays were £5.9 billion to Q1 this year. May not be appropriate for comparison purposes, but if over a year the financial penalty Barclay's paid was the same basis as the penalty for dodging a £2 tube fare in central london - the fine for being caught would be just south of a whopping 10 pence! Simple incentive theory here. At that rate I'd dodge the fare every. single. day. The fine (reputation damage be damned as I'm not sure there is a honest broker to take my business to) is off by at least 2 orders of magnitude.
The philosophy is it isn't fair to penalise non-complicit employees, shareholders, and other stakeholders. Thus, when possible, the directors are decapitated and those responsible are charged personally.
Note that it wouldn't be productive for regulators to fine banks into needing to be rescued. I also suspect they're being cautious in light of the torrent of asymmetric lawsuits and contract unwindings about to hit these banks.
Wouldn't penalizing the shareholders actually be a good free-market approach? Since the shareholders are ultimately the owners of the business, at least notionally, the free-market way to incentivize good behavior on the part of the business is to push those incentives onto the shareholders. If shareholders are penalized for bad behavior, they'll be motivated to control their board/executives/employees properly, instituting sufficient procedures and exercising sufficient oversight to avoid getting themselves in hot water.
That line of reasoning is why we have so many problems.
The banks profited immensely from the manipulation, at the expense of other companies around the world (and their shareholders, employees, stakeholders).
If the directors knew about it, then they should be punished, as should the employees directly involved, but so should the bank itself.
If shareholders thought that companies they owned were immune from punishment, it would create an incentive for them to try pressure directors or employees of the company into doing morally or legally dubious things.
Sadly, this type of corruption looks to me to be far to deep for simple fines to fix. There is a rotten culture in London that needs to be removed.
It reminds me of the Enron recordings [0] ...
> "This is going to be a word-of-mouth kind of thing, We want you guys to get a little creative and come up with a reason to go down."
> "O.K., so we're just coming down for some maintenance, like a forced outage type of thing? And that's cool?"
> "Hopefully," Mr. Williams says, before both men laugh.
I appreciate that, but as far as incentives go, if you knew the chance you had of being caught was minimal and that even being caught and charged as criminal you'd have walked away with good amount of change - it's not much of a deterrent. And we're I a shareholder, I'm honest enough to say I (and I suspect many others) would probably turn a blind eye to it.
As to fining the banks into being rescued, totally agree that defeats the point. Think of it more as giving them a long term mortgage penalty. Say LIBOR + x basis points paid back over 20 years. :)
