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By Bloomberg

Whatever the outcome of Britain’s election this week, the outlook for the country’s banks is worsening.

Almost seven years since the industry received the biggest taxpayer bailout in history, public confidence in banks is near an all-time low and lenders’ efforts to boost profit are being frustrated by investigations into alleged currency and interest rate-rigging. Since the coalition government took power in 2010, U.K. bank stocks have lost 7 percent. Their U.S. counterparts have returned 46 percent.

The industry’s prospects look to be getting worse as both major political parties distance themselves from the City, London’s financial district, before the May 7 election. The Bank of England is preparing harsher stress tests this year that may force firms to bolster capital buffers, and new rules require expensive firewalls to be created around consumer operations. A levy on bank balance sheets has been increased eight times since 2010.

U.K. taxpayers sank about 1 trillion pounds ($1.5 trillion) into banks in 2008 and 2009 to prop up the nation’s failing system, and still own 79 percent of Royal Bank of Scotland Group Plc and a fifth of Lloyds Banking Group Plc.

Before the election, the tarnished reputation of the industry has taken another battering with HSBC Holdings Plc embroiled in allegations that it aided tax evasion. The Asian- focused lender has said it may leave London because of rising tax and regulatory costs, and Standard Chartered Plc may join it.

The banks remain unloved by the taxpayers who saved them: 68 percent of Britons said it would be good or would make no difference if lots of bankers left the country, according to a survey by polling company YouGov Plc in November. Seventy-three percent want to see bankers’ bonuses capped.

The U.K. is introducing some of the world’s toughest rules on financial conduct, including jailing senior bankers for “reckless misconduct” that contributes to a firm’s collapse, as it attempts to focus accountability on individuals, a source of public anger.

The industry is smaller and less profitable than before the crisis. Together, the banks have eliminated 193,828 jobs and cut 1.82 trillion pounds of assets since 2008, according to data compiled by Bloomberg.

Courts

‘Flash Boys’ Programmer Convicted in Goldman Code Theft Case

Former Goldman Sachs Group Inc. programmer Sergey Aleynikov was found guilty in the high-frequency trading code theft case that illustrated the difficulty of using existing law to protect technology central to financial markets.

Aleynikov, whose travails helped inspire Michael Lewis’s “Flash Boys,” acknowledged that he breached Goldman Sachs policy by downloading the code to his home computers. While Aleynikov’s attorney, Kevin Marino, argued that taking the code wasn’t illegal even if it violated bank policy, jurors decided it was a crime.

A jury in New York state court on May 1 convicted Aleynikov of illegal use of secret scientific material while acquitting him of illegal duplication of computer-related material.

Courts are struggling with the application of laws to computer technology, said Stephen McJohn, a professor at Suffolk University Law School in Boston. Judges and juries rely on statutes that didn’t contemplate present technology, he said.

Jurors couldn’t reach a decision on a third count -- also for unlawful use of secret scientific material. Both sides agreed to discharge the jury without further deliberations.

Aleynikov declined to comment after the partial verdict was read.

Michael DuVally, a Goldman Sachs spokesman, had no immediate comment on the verdict.

New York Supreme Court Justice Daniel Conviser can set aside the guilty verdict. Aleynikov’s lawyers sought to have the indictment dismissed. Conviser said he will rule on the request in the next five to six weeks.

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Comings and Goings

Irish Central Bank Chief Honohan to Resign Early as Crisis Fades

Patrick Honohan, the governor of Ireland’s central bank who oversaw the rescue and restructuring of the nation’s lenders, said he’ll resign toward the end of this year.

The banks, which caused the country to seek a bailout in 2010 as they teetered on collapse, are moving into a “new chapter” and it’s a “good time to go,” Honohan told reporters in Dublin on May 1. Honohan is also a member of the European Central Bank’s Governing Council.

The bespectacled, bearded Honohan, who previously worked at the International Monetary Fund and the World Bank, was hired in 2009 by then-Finance Minister Brian Lenihan to overhaul a central bank whose reputation was tarnished following the near- implosion of the country’s lenders. He oversaw stress tests requiring taxpayers to commit as much as 64 billion euros ($72 billion) of capital to banks, and repeatedly urged the government to rein in public finances.

In another step to maintain stability, three months ago, Honohan oversaw the introduction of mortgage-lending limits for Irish banks, designed to prevent another bubble forming as house prices rebound.