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+--- Thread: Parliamentary blame-storming on bankers bonuses (/thread-834.html)
Parliamentary blame-storming on bankers bonuses - David Guyatt - 10-02-2009
If the Parliamentary Select Committee also bring in the regulators -- the Old Lady, FSA and whichever Chancellor was on watch at the time
hot: then the blame game will play better. Better that is if the powers that be ever decide to use their statutory powers to force strict regulation in the future and to commence a police fraud investigation of what went on (but please God not the bloody incapable SFO).
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Former banking bosses say 'sorry'
The former bosses of the two biggest UK casualties of the banking crisis have apologised "profoundly and unreservedly" for their banks' failure.
Former Royal Bank of Scotland chief executive Sir Fred Goodwin told MPs on the Treasury Committee he "could not be more sorry" for what had happened.
The former bank chiefs also said the bonus culture had contributed to the crisis and needed to be reviewed.
But Sir Fred said if bankers felt they were not paid enough, they would leave.
Sir Tom McKillop, former RBS chairman, also admitted that his bank's much-criticised purchase of Dutch rival ABN Amro had been a "big mistake".
Personal gain
The former bosses, along with other bankers, have been criticised for taking huge bonuses from banks that later had to rely on taxpayer money to survive.
The MPs began by asking the former bosses about the bonuses they received in 2008.
Sir Fred Goodwin said he had taken no bonus that year, but that he had taken home a salary of £1.46m.
Andy Hornby, former chief executive of HBOS, said he had also not taken a a bonus last year, and that he had never taken any bonus in the form of cash.
"I have never received one single penny in cash bonus," he said, referring to his time not only as boss of HBOS but also his time on the board.
Instead, he said, he had taken his bonuses in the form of shares.
"I have lost considerably more money than I have been paid," he said, referring to falls in the value of shares that he had been given as bonuses.
Sir Fred Goodwin added he had lost around £5m on the value of his shares in 2007, although he stressed that he was not complaining.
Bonus culture
Mr Hornby conceded that the culture, where bankers can receive many times their salary in cash bonuses, did need to be looked at.
"The bonus system has proved to be wrong. Substantial cash bonuses do not reward the right kind of behaviour," he said.
Sir Tom McKillop agreed that a fundamental review of remuneration was needed.
But when asked whether the bonus culture encouraged excessive risk taking and had exacerbated the banking crisis, Sir Fred Goodwin argued that traders had been trading within set limits, and had simply been doing "what they were authorised to do".
It is "hard to say that remuneration was a cause [of the bank's problems]," he said.
Huge losses
Sir Fred oversaw a number of acquisitions that made Edinburgh-based RBS one of the world's biggest banks.
But his £10bn deal to buy Dutch rival ABN Amro late in 2007 is now seen as ill-timed and a deal too far in light of RBS's inability to survive the credit crunch without a massive injection of government funds.
Sir Tom admitted to the committee that the deal to buy ABN was "a big mistake".
"We bought it at the top of the market and anything we paid was an error. We are sorry we bought ABN Amro," he said.
Sir Fred said it was a "bad decision and certainly mistimed."
He said the size of RBS, together with its lack of cash following the ABN Amro, made it particularly susceptible to the credit crunch.
RBS is now nearly 70%-owned by the taxpayer after a government rescue package was put in place at the end of last year.
No easy ride
The ex-bosses of HBOS also admitted mistakes.
When pushed, Lord Stevenson, former chairman of HBOS, said the mistake the bank made was a failure to predict the credit crunch, which effectively froze access to new funds.
"The fundamental mistake of HBOS was the failure to predict the wholesale collapse of the wholesale markets," he said.
The MPs asked why a HBOS group risk manager was sacked in 2007 for raising questions about the levels of risk the bank was taking on.
Lord Stevenson would not be drawn on the specifics of the sacking, simply saying that it had been subject to an independent investigation.
But Mr Hornby stressed that an over-reliance on wholesale capital markets for funding was indeed the root cause of the problem.
"We were over-exposed to wholesale funding," he said.
Banks use the wholesale markets to raise cash - effectively borrowing money from other financial institutions.
When this funding dried up as a result of the credit crunch, the bank was left high and dry, he and Lord Stevenson argued.
HBOS was rescued by Lloyds and the merged group is now more than 40%-owned by the government.
The bosses still in place at the helm of Britain's leading banks will appear before the Treasury Committee on Wednesday.
Bosses' pay at UK banks receiving government support
Position Total pay (including bonuses) 2007
RBS
Sir Tom McKillop Chairman £750,000
Sir Fred Goodwin Group chief executive £4,190,000
Johnny Cameron Chairman, global markets £3,256,000
HBOS
Lord Stevenson Chairman £821,000
Andy Hornby Chief executive £1,926,000
Peter Cummings Chief executive, corporate division £2,606,000
Lloyds TSB
Sir Victor Blank Chairman £661,000
J Eric Daniels Group chief executive £2,884,000
Terri Dial Group executive director £1,995,000
Bradford & Bingley
Rod Kent Chairman £265,000
Steven Crawshaw Group chief executive £1,112,548
Chris Wilford Group finance director £700,572
Northern Rock
Matt Ridley Chairman £223,000
Adam Applegarth Chief executive £785,000
David Baker Deputy chief executive £476,000