Banks And The Full Sorry Story…

This item is not directly linked to the main themes of this blog but is very topical nonetheless.

Today, the former Chairmen and Chief Executives of The Royal Bank of Scotland and HBOS appeared before the Parliamentary Treasury Committee to be grilled on the UK banking crisis.

Robert Peston’s take on it is here, including:

“Mistakes were admitted – but motivation was glossed over.”

followed by

“But they gave little clue as to why they made these remarkable errors.

Were their banks gripped by a get-rich-quick bonus culture that led them to take excessive risks in the pursuit of short-term profit?

There was a faint nod toward that, but no acknowledgement that the remuneration system that enriched the few at the expense of the many might have been a serious problem.

Did they lack the knowledge and skills to assess the risks they were running? They all denied that they weren’t up to the task of controlling their huge, complex and sprawling banks.

Were there inadequate checks and balances in place, lousy governance, the wrong people on the wrong board committees? They all looked a bit nonplussed.

Perhaps it’s too early to expect those in part to blame for our economic woes to fully understand the motivation that led to the calamitous meltdown of their banks and the near collapse of the entire financial system.

Perhaps they never will grasp fully what went wrong. But it matters that we learn the lessons, so we can design a sounder, safer financial system.”

However really learning lessons is an extraordinarily tricky business (even for much simpler situations) so I certainly wouldn’t bank on that as a realistic outcome (no pun intended).

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