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MPs slam bankers over 'easy rewards' culture
BANKERS are today accused of making "an astonishing mess of the financial system" by MPs who brand them the "principal authors of their own demise".
Senior bankers "complicated" banking so that risks were obscured, "abandoned" traditional prudent lending and failed to manage their own funding requirements, says a cross-party Commons committee.
The committee also points the finger at politicians and regulators for failing to keep bankers in check in a "febrile" environment of overconfidence and over-optimism where traditional voices of caution were stifled and a "culture of easy reward" prevailed.
It backs the Government's rescue of banks last year, but says the body set up to manage the Treasury's banking interests must use its influence to "fundamentally change" the bonus culture that has seen bankers regularly pocketing six-figure sums.
MPs also accuse banks saved with taxpayers' money of behaving "insensitively" by hiking fees and interest rates and say they are "very concerned" about levels of credit to small businesses.
They say a new panel should be set up to monitor progress and say there is an "unresolved inconsistency" between the assurances of bank bosses and complaints on the ground.
The committee also brands Government schemes "piecemeal and disjointed", calls for greater clarity over how much public money is at risk from guaranteeing bad bank debts, and says the Treasury must provide an exit strategy for ending its involvement in the banks.
However, Liberal Democrats branded the report's recommendations for change "very limp".
"We have experienced a comprehensive failure of the banking system at all levels," said John McFall, chairman of the Treasury Select Committee. "The banks have failed to govern themselves effectively, senior managers failed to understand the investments being made in their name, risk management and due diligence were seemingly ignored, and the non-executive directors failed in the proper scrutiny of the banks' activities.
Today's report is the most detailed attempt so far to shine a light on banking in recent years and the financial crisis that saw major high street names like Northern Rock and Bradford & Bingley nationalised, HBOS merged with Lloyds TSB and the Government taking a majority stake in Royal Bank of Scotland.
The committee has quizzed bankers, civil servants, the Chancellor and a host of other witnesses. Its damning verdict is expected to be followed soon by another report on the pay and bonus culture.
The committee accepts that the rescue of Halifax Bank of Scotland by Lloyds TSB – which has put thousands of jobs at HBOS offices in Yorkshire under threat – was necessary as HBOS teetered on the brink of collapse, but says Ministers must address competition concerns.
It also says Ministers must assess the impact on the buy-to-let market from the nationalisation of the mortgage arm of Bradford & Bingley.
MPs say that on a visit to Halifax they found "a feeling of betrayal that a town whose history was closely entwined with the growth of the building society was now reduced to a state of nervous anxiety", along with resentment at the "greed and short-sightedness" of HBOS managers.
In Leeds they say there was concern about Government schemes to support businesses and uncertainty about jobs.
Mr McFall said problems experienced by small businesses were brought home "starkly" on regional visits, but an RBS spokeswoman said the bank was "very much open for business" and said lending to small businesses was up ten per cent.
Liberal Democrat treasury spokesman Vince Cable branded the Asset Protection Scheme "a fraud against the taxpayer" and said the committee had produced a "very limp set of recommendations".
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Friday 10 February 2012
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