THE government seems intent on liberalising financial sector regulations, obviously because ex-banker Rachel Reeves has an overinflated view of the banking industry.

Regarding the City as the “crown jewel in our economy” seems ridiculous when the role banks play in our economy is actually analysed.

As for deregulating, recent events in the City would suggest more rather than less regulation is needed.

For example, a few weeks ago Metro Bank’s fine of nearly £17 million for four years of failing to control money-laundering worked out at around £4m for every year. God knows what it would mean for every time the bank failed to check the details of each of the 60 million transactions made, worth £51 billion.

The so-called watchdog, the Financial Conduct Authority (FCA), explained its leniency on the fact that “the bank did not have the systems in place” to check the legality of these transactions. Presumably, it could not ascertain whether the money was coming from drug dealers, gangsters or sanctioned Russians. The alarm was raised in 2017 but the bank failed to fix the problem until July 2019. With that sort of regulation in place, who needs deregulation?

What about Barclays, a bank with annual profits currently amounting to around £6.4bn? In 2008 during the financial crisis, Barclays had been desperate to avoid being taken over by the government, like RBS and Lloyds, and paid hundreds of millions to Qatari investors to contribute new capital.

Even though the bank’s failure to inform shareholders accurately about dealings with Qatar was “misleading, false and/or deceptive,” the FCA only recently fined it a mere £40m, when Barclays had just announced a 23 per cent increase in profits for the third quarter. The regulator explained its leniency by saying that “the events took place over 16 years ago,” and that Barclays is a “very different organisation today.” Well, that’s all right then.

Fines, and the threat of fines, do not act as a deterrent when they take so little of banks’ vast profits. The story around Starling Bank’s activities is astounding.

Granted its banking licence in 2016, it grew exponentially during the Covid crisis, misusing bounce-back loans, 100 per cent guaranteed by the government to keep the economy going, to attract new customers. Before the pandemic, Starling had issued only £23m of its own loans, but by March 2021, that figure had risen to £1.6bn.

Then in 2022, the bank realised nearly 300 customers who had been kicked out for “financial crime reasons” had been able to reopen their accounts. It was supposed to refuse applications from any high-risk customers while it improved controls, but instead opened 54,000 accounts for 49,183 high-risk applicants.

Starling was fined £29m, even though it claimed £94m of taxpayer money through the bounce-back scheme on loans that were later flagged for fraud. Some crown jewel!

The vast majority of bank lending, around 80 per cent, simply inflates the price of property, and adds to the country’s inequality. The more house prices rise, the bigger the mortgages needed, the more money banks and lenders make, and the harder it becomes to get on the housing ladder.

Only between 2 and 5 per cent of lending goes to small and medium-sized enterprises, even though they provide 60 per cent of Britain’s private-sector jobs.

Many of the highly educated and skilled people employed in the City would serve the economy much better if they worked in industries offering the most potential for prosperity. Keir Starmer and Reeves seem to forget that the fastest growth on record for Britain’s banking industry occurred in 2008 — and look what happened then.

It is indeed “important to learn the lessons of the past,” as Reeves has said, but I seem to remember the policy of the last Labour government of deregulation and inflated pay for bankers not ending so well. This government has even refused to scrap the cap on bankers’ bonuses.

So there’s feeble, biased regulation, money laundering, misuse of government schemes and taxpayers’ money and misleading investors. It couldn’t get worse, or could it? What about us, the customers of Reeves’s “crown jewel?”

Banks were allowed to get away with making billions during the inflation crisis by exploiting customers, holding down their savings rates, and escaping all threats of windfall taxes. The FCA’s website declares it aims to ensure “customers get a fair deal.” Ha!

Most of banks’ profits in Britain come from their “net interest” margins — the difference between the interest received for loans and the rate paid for deposits — and during the recent inflation crisis HSBC, under CEO Noel Quinn’s leadership, increased its “net interest” margin by almost a whole percentage point between 2021 and 2023.

At a time when most people in Britain were struggling with a cost-of-living crisis, HSBC’s pre-tax profits rose by 80 per cent in 2023, and Quinn’s pay reached £10.6m. The other banks saw profits rise substantially when their “net interest” rates increased by around half a percentage point.

Oh, by the way, guess who was recently knighted in Starmer’s recent honours list? A certain Mr N Quinn. When a Labour government knights someone who’s made a fortune ripping off the British people, it’s time to worry.

And just to rub it in, taxpayers are subsidising these greedy monstrosities. In 1960 Britain’s banking sector’s assets were equal to just 32 per cent of GDP; by 2022 this had increased to 563 per cent of GDP. Even so, the Bank of England is now paying 5 per cent interest to banks on £700bn of their reserves at a cost to the Exchequer of £35bn a year.

If Reeves decided to pay interest on only a third of the reserves it would save her just over £22bn a year and fill the “black hole” in the government’s finances without the need for spending cuts or tax rises. End child poverty? No cuts to winter fuel allowances? Compensate Waspi women?

Too often the Bank of England ignores key factors in inflation, like Britain’s top 350 companies raising their profit margins 89 per cent in the years between 2019 and 2022. Raising interest rates before earlier ones had time to take effect simply led to massive profits for banks: consequently, Britain’s “big four” banks made £28.93bn in the first six months of 2023.

And our Labour government thinks there’s too much regulation. You couldn’t make it up. At the very least, bank bosses should be required to justify profits in front of the Commons Treasury committee, and Labour MPs should be insisting on a review of British banking practices.