Climb the steps from Bank tube station beneath the portico of the Royal Exchange, and your eyes are drawn left to the imposing bulk of the Bank of England. Its impenetrable curtain walls, important entrance and pink-coated doorman are designed to project an image of soundness, safety, security and tradition. Walk past the Bank, down Throgmorton Street and at the junction of Old Broad Street you will find a Tesco Express. There you can buy a packet of raspberries wrapped in a plastic sleeve bearing the name Rosedene Farms and an oak tree logo. There is no such farm, no such place. It is a sham to trick the customer into imagining the fruit comes from a picturesque farm in Devon, nestling in hedge-bound countryside. Floodlights, tarmac, vast sheds, razor-wire and roaming guard dogs are the reality, but that would shift no fruit.

The Bank of England and its fellow regulator the FCA are just as guilty of projecting an image which is not real. The latter sits in a showy glass tower in Canary Wharf, aping the companies it regulates, yet has consistently failed to prevent major financial frauds and disasters, and is no match for the people it regulates, never ahead of them and surprisingly reluctant to have a go at them when they misbehave.

I mention all this as the history of the Libor-rigging scandal made me wonder whether regulation was a total waste of time and money. The FCA and others operate an apparently solid regime which should make all those it regulates fear its reach and its vengeance. From 2005 on large numbers of people in the interbank interest rate market operated in a way that would not be out of place in Wyoming in 1830. On a daily basis they sought to rig Libor, a key benchmark which is set in the City of London, in order to mark their trading positions in their favour. It was fraudulent and criminal behaviour, and the copious emails and phone tapes of their activities suggest that they did it without fear of the regulator, of management, of anybody. They sought only to make themselves wealthier at the expense of those who relied on Libor, and had lost all sight of any moral compass. They were completely out of control. There was nothing surreptitious about their behaviour, and they left a gleaming audit trail in their wake. So the Bank of England or the FCA must have felt their collars. Er, no. Tom Hayes is the only person who has suffered a significant penalty for his actions. The judge, in his sentencing remarks, said that Hayes had threatened the integrity of an index which was backed by the reputation of the City of London, and that the sentence must reflect that – and gave him 14 years. An appeal cut the term to 11 years, but nobody in positions of responsibility for Hayes’s trading has been indicted. People who knew what he was doing, who were paid bonuses based upon his profitability, who had supervisory jobs – no charges. It is not possible that Hayes did what he did without the knowledge and approval of his superiors.

Hayes’s trial brought to light a large amount of email evidence which showed that the people he dealt with in the setting of Libor, brokers, traders, middle-office staff, thought nothing of setting the rate wrongly. They were operating in an industry lousy with compliance officers, anti-money laundering regulations, FCA approval forms etc etc. Yet they were completely out of control. This is where the regulators get it so wrong – the key to people’s behaviour in an organisation is culture, and culture is set by the leadership. That is why the Barclays CEO’s pursuit of a whistleblower is so egregious – that tells the people that work at the bank that they will not be supported if they report wrongdoing; instead they will be hunted down. Regulators should focus on culture, leadership, example – then they will find the behaviour of traders and others will become compliant. The Royal Navy has a very simple culture, which stems from Nelson: if you see the enemy, close with them and destroy them. It is the bedrock of the Navy’s success. If the FCA and others wish to improve the behaviour of those it regulates, it needs to concentrate on the culture fostered in banks and brokerages by the directors and managers, and support those who report malfeasance. The Navy shoots its admirals if they fail to uphold the service’s values – the FCA should follow its example, metaphorically.