Unpredictable regulation can prolong misery At the risk of being lynched, I am about to come to the defence of some well-paid bankers. These are men who, their critics would say, epitomise the worst aspects of capitalism, breaching laws willy-nilly and exploiting profit opportunities with no moral compass. But both Peter Sands and Bob Diamond have been hard done by - and dangerously so. A few weeks ago, Mr Sands, chief executive of Standard Chartered, was accused by one US regulator of running a "rogue institution," which "carefully planned its deception" of US authorities over financing Iranian operations. Sounds like a pretty bad man. On Friday, Mr Sands duly sealed an expensive settlement with Benjamin Lawsky of New York state's Department of Financial Services (DFS), paying $340m to make amends for the bank's transgressions. A little earlier in the summer, Mr Diamond, the former head of Barclays, was tarred and feathered more roundly still. One of Britain's best paid bankers until he resigned in July, Mr Diamond had been accused by the UK authorities of using aggressive, complex structures to get around rules on capital and tax. He had also been implicated in a period of now infamous abuse of the process used to set the Libor interbank borrowing rates. It is perhaps understandable that the mood of the establishment has become enmeshed in the public's anti-banker sentiment. But it is particularly worrying how politicised the supervision of our banks - at least in the UK and US - appears to have become. Consider Mr Diamond's fate. Whatever your perspective on the man - brilliant trader, inspiring manager, arrogant schmoozer, or all of the above - the important fact was that, even after regulators concluded their assessment of Barclays" Libor misdemeanours, they considered Mr Diamond still to be a "fit and proper person" to run the bank. Barclays" expensive global settlement, which saw it pay £290m to regulators in the UK, US and elsewhere, was supposed to draw a line under the issue. It only took a few days, though, for the bank's chairman Marcus Agius to be summoned before Sir Mervyn King at the Bank of England (which is not Barclays" regulator) and told that Mr Diamond had to go. Prime minister David Cameron and chancellor George Osborne were said to be delighted. This is not the way banks should be regulated. If transgressions are serious enough, regulators (in the UK, that is the Financial Services Authority) should remove a chief executive. Otherwise, if there is any ousting to be done, it should be at the hands of the board, not the government or the central bank. The tale of StanChart also has two sides. While the bank clearly breached US sanctions on Iran, there is an almost comic gulf between the $250bn of wilful abuses that Mr Lawsky alleges and the $14m of clerical errors that StanChart has talked about. It is impossible to know what the real figure is. But the unusual strength of Mr Sands" rebuttal of the DFS's initial complaint is noteworthy - evidence, to the bank's critics, of its consummate arrogance; proof, to those suspicious of Mr Lawsky's motives, that the scope of the complaint was overdone. The truth is that StanChart - whatever the morals of doing business with Iran - was stymied by US rules designed to make the country look like it was barring Iranian business dealings while at the same time retaining valuable petrodollar trade. The mechanism to achieve that - the so-called U-turn rule - facilitated dollar trade, as long as deals did not originate or end up with a US counterparty. StanChart was caught between that complexity and the evident political ambitions of Mr Lawsky - a former sidekick of Andrew Cuomo, the former New York attorney-general, now New York governor. Given that Mr Lawsky had the power to revoke the bank's New York operating licence, $340m to settle the dispute was a small price to pay - even if only $14m of transactions were genuinely in breach of the rules. Losing that licence would have jeopardised as much as $200bn of trading a day - disastrous for the bank and its investors. For a bank whose business is spread across emerging markets, some of them beset by political instability and volatile economies, it is ironic that the biggest risk to hit StanChart for some time has come from the supposedly stable US. Banks and bankers are the bogeymen of governments around the world. But, as long as economies are structured as they are, they will need banks to help them rebound. If even the US and UK are policed by unpredictable forces, investors will stay away, and that can only prolong the misery.