It goes without saying that the infamous slogan ‘Greed is Good’ epitomises the opprobrium consumers felt when they heard tales of investment bankers in Wall Street selling short and others who dabbled in worthless paper such as credit default swaps (CDSs) that culminated in the sub-prime bubble.

This week, the news of the resignation of both the chairman and CEO of Barclays, following the Libor rate-fixing scandal allegedly run by the bank for over five years, has shocked the international media. Bob Diamond, the CEO, blamed a “series of unfortunate events” for his shock departure from Barclays as he fended off calls to give up his multimillion-pound bonuses. The banking chief admitted feeling “physically ill” when he woke up to reality that bank traders had manipulated the key Libor rate. All along he strongly denied he was personally culpable for their actions. Perhaps reality is always a sour reminder of what went wrong with depositors and their precious savings.

Switch to the local scene, where we can never forget the saga of the €50 million property fund administered by La Valette Multi Property Fund managers with Bank of Valletta plc as its major shareholder and custodian. One of the funds that collapsed included the so named Belgravia property fund that left a huge hole in the balance sheet. Sicav’s managers stressed that property values had been hit by the global financial crisis while new financing dried up. It came as no surprise that the financial regulator, jolted by various collective legal claims instigated by aggrieved unit holders started to investigate. After two years, it was concluded that the manager of the fund had wrongly applied and wrongly monitored the application by its underlying fund managers of investment restrictions laid down in the fund’s prospectus. In 2011 and 2012, the MFSA found BOV in breach of financial regulations in connection with the La Valette’s multi-manager property fund in the first of three investigations. The bank and its subsidiary company Valletta Fund Management were fined a total of over €550,000 for regulatory breaches.

In an island where the culture of resignations has not taken root, it was surprising to read that the Green party Alternattiva Demokratika had called for the resignation of the government-appointed chairman of the Bank of Valletta, following the statutory reprimand by the regulator based on its finds of the mis-sale of the La Valette Property fund to retail clients. To date, nobody has taken the blame for breaching the regulation, so much so that on 26 May the media reported that BOV chairman Roderick Chalmers defended his bank’s handling of the fund, which first hit the headlines in August 2010.He said his resignation was not on the cards. Questioned about rumours of his resignation, he said he was “very interested to read the speculation... it’s news to me as much as it’s news to you,” he told a journalist. Three weeks later, Roderick Chalmers announced his resignation as chairman following the tragic loss of his youngest son Alistair.

Is it coincidence that rumours are circulating that an ex-partner of PricewaterhouseCoopers (PWC), who previously acted as the lead auditor of La Valette fund, may be his immediate replacement? More will be revealed in the coming days. Certainly the finance minister holds PWC (his previous employers) in the highest regard. Comparisons are odious and there was never a better example than that of trying to compare the La Valette default of €50 million with the sudden collapse of the Madoff’s hedge fund worth over $50 billion. In the case of La Valette and Valletta Fund Management (VFM), the unit holders ably led by Finco Trust, succeeded (after starting legal proceedings) in receiving a take-it-or-leave offer by BOV as partial compensation of their investment. Another payment on top of this offer has been mandated by MFSA in a future study of deserving investors who can prove they are inexperienced. This did not happen in the mega scandal run by Madoff. This was a nefarious scheme sold to many experienced investors that went undetected by US regulators for a long time. As stated earlier, it was all done behind closed doors resulting in consumers being lured into lucrative returns offered by hedge fund and investment managers. Although due to its sheer size and deviousness the Madoff’s Ponzi scheme dwarfs the discomfort suffered by local investors, one can never ignore the plight of the 240 people in Malta who, unaware of the risks, invested millions in the €84 million La Valette fund. Simply put, the fund lost three quarters of its value. It is now all out in the open that the Jersey-based Belgravia Group, which ran three specific funds, had been placed under criminal investigation. No audited accounts were presented by Belgravia to VFM in order to assess their credit and investment risks before committing €24 million. This property fund started being marketed locally in 2005 to so-called “experienced” investors with BOV acting as the main custodian. Back in Wall Street, the story goes that the hapless investor suffers the brunt of unrepentant investment bankers who many blame as responsible for some of the financial failures that led to a post Lehman recession.

Unbridled greed paved the tortuous way for the start of the credit crunch. One can never forget how much fuss politicians made to bail out US banks and, following the election of president Obama, massive bailout funds (TARP) were deployed to buy out toxic assets accumulated by banks and other financial institutions such as AIG. All this has culminated in the biggest and deepest recession since the end of the Second World War. Many economists now acknowledge that the Lehman collapse was unique, but equally intriguing is the revelation of the rate rigging carried out by Barclays.

In such instances, when unlawful activity takes place in Britain, its code of ethics demands immediate resignations from those captains, who rightly or wrongly are the ones where the proverbial buck stops. It was Bob Diamond who resigned as chief executive of Barclays this week followed by an earlier resignation of the chairman, Marcus Agius. The media were shocked to hear how the market-fixing scandal developed. In essence, it revealed how British authorities encouraged banks to report lower than actual borrowing rates to ease market concerns on the banks’ financial health. Barclays and other banks altered those costs when reporting them to regulators, according to documents filed with the Financial Services Authority. They worked in conjunction with other banks to move these rates in directions that helped the banks benefit from trading positions.

In order to understand how this works, one can start by saying that international banks borrow from each other on a daily basis and report at what rate they borrowed the money. A high rate can indicate a bank having problems borrowing money because it is in financial trouble. The reports are compiled in a benchmark interest rate − the London interbank offered rate, or Libor − used to price the rates charged on mortgages to business loans worldwide. Libor is a flagship London instrument used throughout the world, while Euribor is the eurozone equivalent. The rates play a key role in global markets, as it affects the rate banks, businesses and individuals pay to borrow money. Manipulating the rate could give the impression that the bank was in a stronger position financially than it actually was.

According to the international media, bilateral settlements by Barclays bankers and other traders had purposefully misreported what it cost the bank to borrow money to an organisation in London that tracks those rates. The settlement also revealed that Barclays colluded with other banks to manipulate their lending rates as well. The settlement says that the scheme was widespread at the bank, and included multiple traders on trading desks around the world. Barclays paid a high price of $453 million for the misdeeds of its top officials who all resigned after being grilled at sessions conducted by regulators. These sessions revealed how US and British agencies found Barclays guilty of deliberately submitting low rates in 2007 and, following the Lehman Brothers demise, that traders at Barclays had been pressuring colleagues to submit false rates to benefit their own dealings between 2005 and 2009. The $453 million fine paid by Barclays is certainly the highest civil fine levied by that regulator in history. Thus ends the story of another bank well known in Malta for its historical connection with the ex-Mid Med Bank, which in the late sixties served as the training hub for our nascent banking community. Before you switch off the lights tonight, save a little prayer for another bank that has to bite the bullet.

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The writer is a partner in PKF an audit and business advisory firm.