It seems the bad bank stories will never end. Shortly after the Telegraph broke the scandal of RBS mis-selling hugely expensive interest rate collars to businesses came the Barclays LIBOR scandal, and this week revelations that HSBC unwittingly facilitated money laundering for drug lords and terrorists.
My contacts in the banking world tell me this news is still the tip of the iceberg. Over the next few months, more shady practices will come out. For example there is growing evidence that most mainstream banks were fiddling LIBOR.
As the co-founder of one of the new crop of online alternative finance businesses (www.marketinvoice.com) starting to challenge the banks, we would never have expected to be operating in such a climate of bank scepticism and banker bashing. What we are witnessing is growing doubt as to whether UK banks have their clients' interests at heart. One former Barclays Capital trader told the Telegraph this Saturday that "BarCap was the Wild Wild West", and that BarCap employees were told to sell hard to their corporate clients - "the thesis from up on high was that we should be making more out of them... we all had to find ways to squeeze more margin out of the same clients".
Considering how hard it is right now for solvent businesses to raise capital right now, and who are being turned down by the mainstream banks, you've got to wonder whether bankers prioritise opportunities to make a quick buck. I wonder how easy it was for the Mexican drug lord to open an HSBC account, and I wonder whether bank sales staff were very persistent when trying to sell hima complex derivative product, rather than green-lighting a higher overdraft?
Of course, while remarks like that raise a smile, they hardly reflect the nature of the problem. Mervyn King was right when he said the culture of banking needs to change; Bob Diamond was right when he said "the evidence of culture is how people behave when no-one is watching."
The trouble with banks is that they have become so big, they are hard to oversee, and internal corporate governance mechanisms aren't that great a tool to root out malpractice. Shareholders have only limited power over CEOs, CEOs have only limited control of senior managers, and senior managers can't be sure of everything their employees are doing. In fact, certain investment banks encourage a culture of autonomy (they call it "entrepreneurship") where whole teams can do what they want as long as they deliver bottom-line profit. Make money and we ask no questions.
That's why culture is so important. And why simple regulation and bonus cuts can't remove a cultural problem overnight - especially if implemented in a knee-jerk fashion. After the last banking crisis, a raft of regulation was brought in quickly, in an attempt to prevent 2008 happening again; in Europe, most notably, the Basel III banking standards emerged.
While these standards have lofty goals - attempting to make balance sheets safer and risk managers more cautious - which all sound good in theory, the truth is that often they have trickled down to hurt ordinary businesses on the high street.
For example, banks are pulling business overdrafts (seen as risky under Basel III), and replacing them with expensive, inflexible factoring lines. It's good for my business, which aims to compete with those products (like invoice finance), but is it good for society as a whole?
Equally, bank appetite for any kind of trade finance has ground to a halt, because Basel III marks exporting as uniquely risky. So, well intentioned regulation has created perverse incentives for banks - and the ordinary person suffers, as job losses come when otherwise healthy firms struggle to finance themselves.
Of course, how does a change in culture come about? Well, a properly funded public enquiry would be a good start. We can all see how the Leveson inquiry has altered the way journalists think about themselves; talk of "culture" in newspapers isn't just nonsense. The legal and medical professions have a regulatory council that oversees best practice and seeks to protect, promote and maintain standards in their fields. Is it time to give the financial ombudsman more powers and make it easier and more effective for businesses to report aggressive practices by financial services providers?
Until we see a proper judge-led inquiry, with all the characters from the backrooms hauled up to speak and account for themselves, people in the City will continue to play at the margins of any rules the regulators set, without thinking about the consequences. Politicians shouldn't jump the gun and regulate from the hip. Changing a deeply engrained culture will take time and the patient involvement of all stakeholders. Ultimately bankers have to believe that they have a positive role to play in our society.