At the British Bankers Association (BBA) conference last month the great and the good of the UK financial establishment pontificated about regaining trust. Sir David Walker, dragged out of semi-retirement to chair Barclays, declared that aspiration was no longer enough. Banks also needed to, "walk the talk", which is an irritatingly meaningless metaphor. Sir Philip Hampton, chairman of Royal Bank of Scotland, decided the best approach was to don full sackcloth and ashes.
He gravely noted: "Weve been not very good for customers and not very good for shareholders." Account holders of RBS-owned Ulster Bank unable to access their own money for weeks on end, or investors looking at the 284p share price and calculating that RBS has the small matter of £57 to rise to make it back to its £60 pre-reverse stock split 2007 peak, would hardly demur.
Sir Win Bischoff, chairman of Lloyds Banking Group, opined: "Banks have not been very good at explaining their primary purpose." Two days later the Bank of Englands latest Trends in lending report showed further decline. On that evidence it is not at all clear that the banks themselves know what it is they are supposed to do. Worrying about how to explain what they are not doing to others seems a matter of second-order importance.
Darby and Joan
The navel-gazing nonsense emanating from the BBA is all too familiar and depressing. There is about as much vim and vigour in British banking as at a Darby and Joan club whist drive. Wall Street is just as bad, although there are a few truly great institutions sprinkled around the fringes of the US banking system. But if you are looking for inspiration and hope you need to turn to continental Europe.
Not present-day Europe of course; that would be absurd. Large swathes of Europes banks are at best dysfunctional and at worst insolvent. We need to wind the clock back 500 years. In Frankfurt in June 1519, the seven Electors of the Holy Roman Emperor gathered to decide one of the most hotly contested imperial elections in history. Unusually, neither of the two main contenders Charles, Duke of Burgundy and King of Spain, and Francis I of France was German.
Pope Leo X opposed Charles, partly because he was heir to the Kingdom of Naples, a papal fief. But not even the intercession of the Holy See could save the candidature of the King of France. Mammon won the day. Charles was lent 850,000 florins (almost 96,000 ounces of gold) by a banking consortium led by the Fuggers of Augsburg to bribe the electors. This was the equivalent of three times the annual revenues of Florence.
This might not have met with modern compliance standards. But Jakob Fugger was a man of many parts. He was born into one of Augsburgs foremost families. The Free Imperial City in western Bavaria stood at the crossroads of trade routes, south from Italy, east to Hungary and the Balkans and north to Antwerp and beyond. The Fuggers mules brought cotton and spices from the Mediterranean ports over the Alps. From this propitious start Jakob went on to create a vast pan-European banking and trading network.
After Holy Roman Emperor Maximilian Is expensive military misadventures in France and Italy, he defaulted on loans from the Fuggers and the bank ended up owning the collateral and an effective monopoly over copper mining. The Fuggers took over from the de Medici family as the Popes bankers, collecting payments and issuing letters of credit on behalf of the Papacy, perhaps the only other Europe-wide business enterprise at the time.
Jakob the rich was also a pious man. He took the warning in Marks gospel seriously: "It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God." He did many good works. But perhaps the most enduring is the Fuggerei. Established in 1521, it is believed to be the worlds first social housing.
It is still funded by the original endowment and administered by the descendants of Jakob. One hundred and fifty people live in the 140 apartments spread between 67 buildings. Then, as now, the needy of Augsburg pay a nominal annual rent, excluding the cost of heating. In return they must say three prayers a day for the Fuggers. The provision of this housing was never designed to be a handout, rather a helping hand for the deserving.
I visited the Fuggerei in the summer. It was rebuilt according to previous specifications after bomb damage in the Second World War. The apartments are small, but functional. Some have little gardens, but even if you are not lucky enough to get one there are lots of communal spaces, a fountain, a church, a pub and a small shop. The Fuggerei was designed as a town within a town. The residents seemed remarkably cheerful, in spite of the never-ending stream of tourists.
Grandiose monuments to the wealth of the Fuggers are dotted all over Augsburg. But though the Fuggerei is modest, it is by far the most impressive. No one will ever replace the remarkable philanthropist George Peabody in my list of favourite bankers, but Jakob the rich is a new addition. The message to those attending the BBA conference is that they would regain trust a lot quicker by a few good works and a lot less spin.