* Swimming with Sharks: The World of Banksters

Review by Jonathan Ford
It has become common since the financial crisis for people to opine confidently and unfavourably about the motivations and morals of those in the financial sector. Banks are “casinos” and those who work in them “spivs” and “wide boys”. This may be an understandable reaction to all those unearned bonuses, the evasions of responsibility for the meltdown, and the dodgy payment protection insurance they’ve sold us. But how many really know what goes on inside the doors of a large international bank — or, indeed, the minds of those we condemn?

Bob Diamond, the unlamented former chief executive of Barclays, once defined the culture of a bank as “how people behave when no one is watching”. He was right in one sense: we know but scraps about the mores of these vital institutions. It is only when scandals break that we see the emails — and glean a little of what really goes on behind their discreet City façades. Generally, of course, the revelations aren’t pretty. Few will be impressed by messages containing promises to crack open some Bollinger in return for a dodgy quote on the Libor interest rate, or the bragging banter of a rogue trader.

But are such exchanges representative? It is not just a question of testing our prejudices. There is a more important issue at stake: the safety and soundness of our creaking financial system. Should we believe bank bosses when they talk of imposing high ethical standards and having (as Diamond claimed to have) a zero-tolerance policy for “jerks”? Or do we still live in the testosterone-fuelled world described by financial journalists such as Michael Lewis; in which those who expect loyalty are advised to get a dog.

If we are to believe Joris Luyendijk, there is bad news: it is the latter. A Dutch journalist with more experience of Gaza than Threadneedle Street, he was parachuted into the City of London on a mission to find out more about the bankers. The question he set himself was simple: how, after the shaming they have endured since the crisis, can “these people live with themselves?” Swimming with Sharks is the testimony from nearly 100 anonymised interviews that took place in an 18-month period from late 2011, and were first published on his banking blog for the Guardian.

It would be wrong to say that Luyen­dijk came to the task without preconceptions. The Netherlands had its own acute financial crisis and bankers are barely better loved in Amsterdam than in London. But like the best recording angels, he not only asks the “dumb” questions. Luyendijk is also willing to weigh open-mindedly the answers. Indeed, it is his willingness to see the good in his subjects that gives his final conclusion greater force.

The book praises some aspects of modern finance. No longer is the City riddled with nepotism and prejudice: it is tolerant and international. Investment banks have diversity days and LGBT groups. The glass ceiling may still exist but it is cracking. “Some of the best traders are now women,” says one interviewee. “Trading is no longer a balls job. It’s a brains job.”

But as Luyendijk talks his way deeper into the financial world, the doubts creep in. No one seems to acknowledge any responsibility for the 2008 crisis. That is to some extent a function of the specialisms within banking, which allow each individual to point the finger at someone else. But it is also down to the culture. Far from curbing the industry’s mercenary nature, the crisis has, if anything, reinforced it. Bankers are ever more vulnerable to “the call” from HR summoning them for the sack. Such a nerve-racking regime cannot but affect their behaviour. “If you can be out of the door in five minutes, your horizon becomes five minutes,” says one.

Meanwhile, the dreary imperatives of shareholder value mean that little matters to management other than the achievement of revenue targets. The best way to bring in money is still to design complex financial products or trading strategies — the risk of which sits principally on the shoulders of distant and unknowing investors. The reliance on so-called “quants” and their sophisticated algorithmic computer models means these are not only incomprehensible to outsiders but to many managers as well. Sales tactics are informed by a pervasive culture of amorality in which everything is permitted that is not illegal.

It is legitimate to question at this point whether Luyendijk’s subjects may be overdoing the gloom. Regulations have been tightened since the crisis. Even the most recidivist bank must be tiring of paying vast fines for mis-selling. He admits that the nature of the contact limited his ability to check on each story’s veracity. He might have included exaggeration or even virtue signalling.

That said, many of his sources seem to reach a similar conclusion. The modern investment bank is not really capable of changing its behaviour, they claim. That is because it is barely a cohesive institution at all. “There’s very limited middle management,” observes one interviewee. “It’s a huge machinery for executing transactions and deals but you’re effectively on your own to make those happen. Everybody — and I mean everybody — is focused on business, on ‘revenue responsibility’.”

Little seems to stand in the path of this juggernaut. Luyendijk dismisses compliance officers and regulators as paper tigers (5,000 regulators to 1m financiers is “not exactly man-to-man marking”). As for the bankers themselves, they seem trapped in a system they cannot control. He divides them into various miserable categories. There are “teeth-grinders” who hate the job but need the money, and “neutrals” who see the wrong but can’t see the point in making a stand. For the most part Luyendijk is sympathetic. It is only when he comes to the so-called “cold fish” — hard-faced transactional types who actually revel in the system — that his generous tone curdles into contempt.

Luyendijk writes with a light touch. His conclusions, however, are sombre. They will certainly not change the views of those who see bankers as moral lepers. But the book’s message is ultimately that the problem is systemic not personal. If we want a stronger system, we must change the incentives rather than wish for nicer folk.