The suggestion by the Dutch finance minister that the bungled bailout of Cypriot banks was part of an evolving new approach to financial crises shocked markets. But is it possible Jeroen Dijsselbloem is right to suggest that there is a fundamental change in public and political attitudes to bank bailouts?
In the past year the reputation of banks has hit a new low. The bust in the eastern Mediterranean followed exposures of the fixing of the London interbank offered rate and the $6bn losses on the JPMorgan Chase “London Whale” trades; each different in proximate cause, each representative of a rotten culture in parts of the financial system.
Barclays came under attack for both Libor manipulation in wholesale markets and the mis-selling of payment protection insurance in its retail arm, showing how a trading culture could spread poison through a larger organisation. JPMorgan’s failure of risk management showed that even in the best-run financial conglomerate, senior executives had – and could have – little knowledge of what was really going on. Cyprus dispelled any illusion that international bodies had acquired the authority or competence to deal effectively on a co-ordinated basis with even minor problems.