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What a load of bankers

2013 April 4
by Paul Vallely

The days are long gone when the British public saw the bank manager as the acme of respectability, responsibility and rectitude. The scale of the banks bad behaviour during the 2008 financial crisis finally put paid to that with its orgy of reckless and self-serving greed. That said, there is still something shocking about the detail which is now emerging of just how bad that behaviour was.

The latest report of the Parliamentary Commission on Banking Standards into the scandalous behaviour at HBOS, the bank created through the 2001 merger of the former Halifax building society and the Bank of Scotland, shows that the total cost to the taxpayer of bailing out the bank was close to £30bn. But what is most disturbing are the levels of poor governance, weak credit risk controls and sheer personal incompetence by top bankers which are now revealed.

The commission, chaired by the Tory MP Andrew Tyrie, includes an impressive range of independent heavyweights including the former chancellor Lord Lawson and the oil executive turned Archbishop of Canterbury, Justin Welby. Their verdict is as damning as it is authoritative. Stripping out the HBOS figures from those of Lloyds bank, with which it was merged in the taxpayer rescue, it is clear that the losses and misjudgements were staggering.

Yet only one man has been held to account for the mammoth fiasco – Peter Cummings, who led the rapid expansion of corporate lending at the bank. He is the only senior figure to be banned from the City by the Financial Services Authority. But the FSA has taken  no action against the bank’s former chief executive Sir James Crosby who conceded before the commission that he had been “incompetent” in the run-up to the crisis. The bank’s chairman, Lord Stevenson, was adjudged by the commission to be delusional, evasive, repetitive and unrealistic. Yet he has escaped practical punishment.

Over at the Royal Bank of Scotland the responsible chief executive  Fred Goodwin may have been stripped of his knighthood but he left the bank with a bumper pension. The bank’s Shareholders Action Group are so furious – unsurprisingly since they have seen their investments slump from a high of 607p before the crash to just 25.37p this week – that they are taking legal action against Mr Goodwin and 16 other former directors alleging “an incredible cover-up” in the months before the bank needed a £45bn taxpayers’ bail-out. Again the Financial Services Authority have taken no action against Mr Goodwin or any other of the bank’s directors.

And Barclays, the bank which prided itself in not needing a taxpayer rescue, has been the subject in recent days of a report into its behind-the-scenes culture which is utterly damning. In an attempt to restore its tarnished reputation Barclays commissioned an independent review of its business practices. What the report shows, however, is an “entitlement culture” in which the top 70 bankers paid themselves a staggering 35 per cent more than their peers in other banks – a pernicious attitude which remains since, though top pay has fallen in the bank, it was still 17 per cent above banking norms in 2011. Most ironically this excoriating report is revealed to have cost £17m to produce – an indication of how out of kilter and proportion attitudes to remuneration remain in the banking industry.

What the report says of Barclays might form an epitaph for the entire banking industry. Our bankers have pursued their own interests at the expense of those of both their customers and their shareholders. They have developed a myopic focus on quick-return profits at the expense of the long-term good functioning of the wider economy. They have allowed the search for a quick buck to create a vacuum in culture and values. They have lost their sense of proportion and humility and all too often appear oblivious to reality. The need for massive cultural change is clear. But there is still no sign our bankers understand that.

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