At least, that’s what HR Director Neil Roden reckons. In his recent interview with HR Magazine he claims that only 300 of the bank’s 155,000 employees were involved in the activities which brought about its collapse in 2008.
If ever there was a clear illustration of the imbalance in the banking industry this must surely be it. While 154,700 people were going about the boring old business of managing savers’ deposits and lending to companies and householders, 300 pumped-up superheroes were having a wail of a time in the casino of global investment banking. It didn’t matter that there were so few of them because the sums they were handling dwarfed the amounts that the rest of the employees were managing. According to Mr Roden, these 300 employees eventually brought the bank to its knees.
It sounds crazy doesn’t it? But, as we now know, the world of investment banking in the run up to the financial crisis was indeed crazy.
That such a small part of a major bank could bring it crashing down would seem to give ammunition to those arguing for a Glass-Steagall firewall between commercial and investment banking. Opponents are quick to point out that Northern Rock was not an investment bank yet it still managed to destroy itself by investing in CDOs linked to the US sub-prime market. Even so, as the Independent’s Ben Chu argued, investment bankers in important commercial banks like RBS know that they have a get-out-of-jail-free card. The government will always have to bail out a commercial bank while it can, albeit with some trepidation, let a bank like Lehman go to the wall. Forcing banks to cut their investment bankers adrift would send a clear message that, in future, they cannot expect government bail-outs.
There are good arguments both for and against a Glass-Stegall separation of the banks. In the end, perhaps the most compelling argument is that such a regulation, if implemented internationally, would simply make banks smaller which must, in itself, reduce the risks for the taxpayer. Whatever happens, a situation where 300 people can bring down one of the world’s largest banks and blow a hole in a G7 country’s economy cannot be allowed to occur again.