UK bankers sorry for mistakes as lawmakers quiz

LONDON - Four British bankers apologised for mistakes that brought Royal Bank of Scotland and HBOS to the brink of collapse, saying the sector should rethink its increasingly unpopular habit of paying lavish bonuses.

By (Reuters)

Published: Tue 10 Feb 2009, 8:48 PM

Last updated: Thu 2 Apr 2015, 3:54 AM

RBS’s acquisition of ABN AMRO was “a bad mistake”, former Chairman Tom McKillop told parliamentarians, saying he was sorry the deal—a major source of RBS’s problems—happened just before the credit crisis shocked banks across the world.

“You’ve destroyed a great British bank,” opposition Conservative parliamentarian Michael Fallon told Fred Goodwin, the RBS chief executive ousted after the UK government came to the rescue by taking a 70-percent stake in the bank.

The cross-party committee quizzed the four amidst fierce media criticism and a growing backlash against bankers and their lavish perks, after the UK government spent 37 billion pounds ($55 billion) to bail out the two banks.

“(The bankers) are not going to be signing on for jobseekers’ allowance any time soon,” said Cath Speight, part of a small group of trade union protestors outside.

“Our members are going to want to know how they pay their mortgage when they’ve lost their job through no fault of their own,” said Speight.

British Prime Minister Gordon Brown on Monday pledged to end rewards for failure in a financial system crippled by the credit crisis, though he stopped short of halting bonus payments at part-nationalised banks.

“We are profoundly, and I think I would say unreservedly, sorry at the turn of events,” Dennis Stevenson, the former chairman of HBOS told a hearing on Tuesday.

Criticism that bonus systems fostered undue risk-taking and helped cause the credit crisis has triggered a global rethink of remuneration, with U.S. President Barack Obama capping executive pay for companies getting taxpayer funds.


Crammed into a fairly small room where many onlookers remained standing, the four bankers showed growing signs of exasperation towards the end of more than three hours of sometimes harsh questioning in which they were repeatedly accused of trying to shirk full responsibility.

“It’s just too simple if you want to blame it all on me,” Goodwin said in the closing minutes. “If you want to blame it all on me and close the book, that will get the job done very quickly, but it’s not going anywhere near (finding a solution).”

The bankers, unflustered for most of the session, suggested changes to their remuneration systems, including paying bonuses in shares only and linking them to the success of their banks over a three to five year period.

Remuneration methods had been imported from the United States, Goodwin said.

John McFall, the chairman of the Treasury committee who lead the questioning, said before the meeting banks were living in the past and must recognise huge bonuses are not acceptable.

“It is a different world and if they (banks) do not recognise that then they will become more alien for all of society,” McFall told Sky News.

Goodwin waived any pay-off when he left, but still received a 2.9 million pound payout in 2007, the year he led RBS’s ill-fated acquisition of ABN AMRO.

Goodwin, a steely Scot who led RBS for nine years, is flanked by his former chairman Tom McKillop, who stepped down from RBS last week, three months before his planned departure.

McKillop has been widely criticised for not restraining Goodwin’s appetite for deals.

Also facing the panel was Andy Hornby, who was chief executive of HBOS until it was taken over by Lloyds in a government-brokered rescue.

Dennis Stevenson, chairman of HBOS from 2001 until the Lloyds deal completed in January, was the fourth member to face the politicians.

The committee will on Wednesday hear from a group of bankers still in charge, quizzing RBS’s new chief executive, his counterparts at Barclays and Lloyds and the UK heads of HSBC and Santander.

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