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Libor, Morality and The Olympics Morality in finance and sport by Peter Savage L ast month I received a long and detailed letter from a customer telling me that his company, effectively a not-for-profit trust with a strong ethical slant, was only prepared to deal with moral suppliers. In his opinion, certain lease contracts did not stipulate clearly enough that termination fees were due at the end of those contracts. I agreed with him and said that applying those fees was not our policy; it was the policy of the lending banks. We refunded him – at our cost – and confirmed that we were instigating internal checks and processes to ensure that no such problem would occur again for him – or for any other customer. He went away happy in the knowledge that his concern had been resolved quickly and efficiently, and that his action would have a long term effect and benefit all our customers in the future. considered too important to UK trading figures. And, thirdly, politicians fear that the repercussions on the economy if banks were allowed to fail (as should have happened, RBS included, in 2008) would be to keep the country in recession for 10 years or more. Morally bankrupt So what do the politicians do? Precisely the moral opposite. They pump more money into the banking system through quantitative easing, and allow RBS and Barclays to be one of the six high street banks to be in control of the “special” funds available to give extra interest discounts from government-supported loans. Are they being penalised for the morally bankrupt business practices of the past? No. The government is trying to push customers more towards them, giving them an almost anti-competitive edge over others in the industry. Held to ransom Bonkers Interestingly enough, he is an RBS customer. RBS, in conjunction with Barclays, is at the forefront of the Libor- fixing scandal that has engulfed the news over the last couple of weeks. In terms of the major banks, nothing about this scandal surprises me and, based on my experience within the finance industry, I believe it is only the tip of a very nasty iceberg that, if it is ignored, could sink the whole Titanic banking industry. In my view the world has gone bonkers; the old boys’ club has gone too far; and we, that is all of us outside the Square Mile, never receive any of the advantages, protections and compensations that large institutes receive. However, it will not be allowed to sink because of its unethical trading standards. Why? Three reasons. First, I can guarantee that our customer will not have written to the chairman of RBS, he will not have threatened to remove his custom, and he will not have complained about unethical trading because he is hook, line and sinkeredly held to ransom by the UK banking industry. Secondly, the City is All this must change at some stage as there should surely be some benefit for acting morally in business, shouldn’t there? Off my soap box Now that I have removed myself off my moral soap box, and not for the first time I may add, spare a thought for this company. Taking a competitive risk Ten years ago a French TV company bid for the exclusive rights for the opening ceremony of the 2012 Olympics. At the time, Paris was ahead, in every poll, to host the Olympic Games and it wanted to ensure it would have full control of coverage of that event. Unfortunately for Paris, the voting went the wrong way and hosting the Games was awarded to London. Was Paris afforded any contractual discount, bail-out or government support? No it wasn’t. Like you and me, it made a calculated business decision – it took a competitive risk – and had to stand by that decision. Painful though business is, there always is a cause and effect in every decision. Fixing the figures By the time you read this we will be mid-Olympics and watching what is the second biggest televised event in the world (the Olympics sits just in the shade of the World Cup, the largest televised event in the world). On our soil, on a lot of the UK broadcast industry’s equipment, with the knock- on effect of bringing to the government a £13 billion benefit … now hasn’t that the sound of a Liboresque conveniently fixed amount that covers the cost of the games? It will be interesting watching the real benefit figures emerge in 2013 or 2014 when tumbleweed is blowing through the Olympic Park … British is best Enjoy the watching, as I am sure the Greeks did. It’s been a bad week for morals in my industry so let’s hope that the hidden effect on the country – the proud-to-be-British, British-is-best feel good factor – kicks off when the Olympics start. Have a good Games! If you would like to know more about finance for your business, do email me on peter.savage@ azule.co.uk and/or write to the TV Bay editor. For more information about us, or to read other articles in this series, look at our website: www.azule.co.uk. 44 | TV-BAY MAGAZINE TV-BAY067JUL12.indd 44 05/07/2012 22:24