First the public had to bail out banks who bet billions on poor value securitised mortgage packages.  They then had to look on at a culture of reward that seemed from a different planet while they coped with pay freezes and price rises.  Now they find that within Barclays, and very possibly other banks, traders manipulated key interest rates to protect the bank’s reputation and to make more money.

The traders were very well paid but not that smart.  ‘Don’t tell anyone, thank you big boy and dude, I’ll buy you a bottle of Bollinger’ are not exactly the cleverest things to write in an internal email system when you are engaged in a systematic coordinated breach of finance rules.  However their stupid crass indiscretion has helped expose what was going on.

So what to do?  The FSA has imposed its largest ever fine and said it would have been even higher except Barclays cooperated with the investigation.  Barclays have agreed to pay this and larger fines to the US authorities.  And the chief executive and a couple of others have said they won’t take their bonuses.  Is that enough?  No.

This is not just a matter of calling for people’s heads.  It is more fundamental than that.  What recent years have exposed is how far our banking system has become removed from its day job – processing payments, lending to aspiring homeowners (who currently have great difficulty getting mortgages) and lending to businesses in the real economy who want to invest and create jobs.

There is a need for a Clause IV moment from banks, and we should be clear exactly what this means.  A Clause IV moment is not a PR exercise that says ‘we’ve changed’.  For it to work it has to be a genuine change of heart that says ‘we understand what it is about our past behaviour you do not like and we will have a top to bottom change in culture and behaviour that shows change as well as claims it.’

I think this would be welcomed by customers who want the banks to focus on serving them rather than dreaming up ever more exotic ways to manipulate the financial system.  It would be welcomed by the vast majority of banking staff who don’t earn fortunes, do a decent job and don’t want to be tainted by the kind of rottenness that has been exposed by the Libor scandal.  And it would be in the long term interests of the banks themselves.

Showing impatience with criticism and saying the time for apologies is over will compound the problem, not just because it prolongs banker bashing but because it shows a lack of understanding of how deep the anger is and why.

Of course there are questions for the regulator too.  Why wasn’t this picked up earlier?  What did they do or not do about rumours that Libor rates were not to be trusted?  But in the end, however one changes the regulatory system it is for the banks to restore trust between themselves and the public.  That is what they must now do.

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Pat McFadden is MP for Wolverhampton South-east and former shadow secretary of state for business

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Photo: PaulyB71