Tuesday February 10, 01:25 PM
Former UK banking chiefs apologise for their mistakes
By Guy Jackson
LONDON (AFP) - The former heads of banks bailed out by the British state amid the credit crunch gave unreserved apologies Tuesday for their conduct, and agreed changes to the bonus system were needed.
The deposed senior executives from the Royal Bank of Scotland (LSE: RBS.L - news) (RBS) and HBOS apologised to lawmakers for failing to foresee the financial turmoil that led to their institutions being rescued by the taxpayer.
RBS needed 20 billion pounds (23 billion euros, 30 billion dollars) of public money and is now 68-percent owned by the state.
HBOS has been swallowed by Lloyds TSB in the newly formed Lloyds Banking Group, which is 43-percent state-owned.
Dennis Stevenson, the former chairman of HBOS, told the Treasury Select Committee investigating the crisis that he and the bank's former chief executive Andy Hornby were "profoundly sorry."
Fred Goodwin, previously chief executive of RBS and a man nicknamed "Fred the Shred" for his aggressive style, added: "I apologised in full and I'm happy to do so again."
He said there was a "profound and unqualified apology for all of the distress that has been caused."
Many of the bankers said they had personally lost money in the crisis, with Goodwin (LSE: GDWN.L - news) estimating his losses from devalued shares at five million pounds.
Stevenson said: "All of us have lost a great deal of money, including of course a great number of our colleagues, and we are very sorry for that.
"There has been huge anxiety and uncertainty caused for... our colleagues but also, for periods of time, for our customers."
Hornby apologised for the effect on customers but said: "I don't feel particularly personally culpable for HBOS' mistakes."
The bankers were also grilled on the size and nature of their bonuses -- one of the most contentious issues of the banking crisis in Britain after it emerged that RBS's new management planned to pay rewards in the coming months.
Hornby said the practice of paying bankers huge bonuses needed to be reviewed, saying: "There is no doubt that the bonus system in many banks around the world has proven to be wrong in the last 24 months."
Paying staff cash bonuses for their decisions "without it being clear whether these decisions over the next three to five years have proven to be correct, that is not rewarding the right type of behaviour," he added.
Goodwin said he received 1.46 million pounds in salary last year but received no bonus.
The ex-RBS executives also apologised for their leading role in the disastrous 2007 takeover of Dutch bank ABN Amro (Amsterdam: AABA.AS - news) for a record-breaking 71 billion euros (100 billion dollars).
The takeover -- the biggest ever in the global banking sector -- was sealed at the height of the market, just before the credit crunch ravaged most banks.
"We bought it at the top of the market and anything we paid was an error," former RBS chairman Tom McKillop said.
"We are sorry we bought ABN Amro."
The successful ABN offer, which was also backed by Belgian-Dutch group Fortis (Amsterdam: FORAL.AS - news) and Spain's Banco Santander (SANB3.SA - news) , beat a rival bid from British bank Barclays (LSE: BARC.L - news) .
"At the time it didn't seem like a big mistake," Goodwin added.
Outside parliament, staff from the two banks protested over the bonus culture and the fact that board members had been handsomely compensated for leading the institutions into turmoil.
"For the guys at the top who make decisions, and make wrong decisions, and take banks to where they are now, I don't understand why they're getting any sort of bonus," Glenn Miller, an IT manager at HBOS, told AFP.
"Everything they (RBS and HBOS) built was built on sand, and now it's all come tumbling down, and these are the guys who got big bonuses over all these years."
Rhianne Parsons, a 31-year-old Lloyds TSB employee, said junior bank staff relied on their bonuses -- which typically were hundreds of pounds rather than the tens of thousands that top executives often got -- to top up their wages.
"We don't get the huge bonuses earned by the chief executives who are responsible for the current crisis in banking," she said.
"We have to work really hard for our bonus but the bosses seem to get theirs whatever happens."
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