London does not have a divine right to rule the banking world.

by Trevor Datson, Etoile Partner

Forget the individuals: Institutionally, London's banks are beginning to look and behave like wounded animals, and rival financial centres old and new are not only right to be licking their lips, they would be foolish not to.

Emerging relatively unscathed from the credit crunch, Barclays might have been forgiven for a moment of self-congratulation, no matter how weakly deserved. But the breathtaking audacity of the dodgy dealings on its trading floor has unseated its chairman Marcus Agius, whose resignation stands only a limited chance of saving the scalp of CEO Bob Diamond. If Diamond is forced to go - and the British media are unlikely to settle for less as they enjoy a moment's respite from examination of their own equally pernicious practices - then that sets a very troubling precedent for rival bosses. Because the one thing that we do know for sure about attempted LIBOR fiddling is that no one bank would stand an earthly chance of achieving this by itself. There are many more skeletons in the cupboard, and it's only a matter of time before the U.S. DoJ and the UK's FSA shake them out.

The advisers of these woebegone CEOs would do well to consider fronting up before the truth is dragged out of them. Currently, the spotlight is on Barclays, but it will only take one or two more dominoes to topple before the entire industry is held guilty by association. If the truth is merely murky rather than entirely black, better to get it out there while one or two people still actually care about the detail of what happened.

Needless to say the City of London can't rely on Westminster to dig it out of its self-created abyss. It's an interesting tightrope for the politicians, and one that history suggests they will straddle in a spectacularly painful fashion. Prime Minister David Cameron knows full well that Britain's unbalanced and tottering economy can't survive for long without the tax take from the City, but equally he knows that voters will have absolutely no truck with any expressed sympathy for his paymasters. Ed Miliband is in an identical position, albeit with the advantage that no-one will hold him too much to account just yet.

About the only thing that London's bankers have earned honestly in recent years is their awful reputation. Can it be recovered? Of course, but we're talking years, and that recovery will only ever be partial. The banks will be hamstrung by their own past and by a political and regulatory environment that might once have saved them, but which will now open the doors to the competition.

London does not have a divine right to rule the banking world. It has in some sense already abdicated. And the conventional pretenders to the throne (New York? Paris? Frankfurt? Really?) are assuredly not whiter than white. So, in some small way, the door to new ideas in banking is ajar. And bankers in Asia, the Gulf and even southern Africa are taking note. Honest bankers have nothing to fear from the sunshine.