Financial firms wrongly prioritised profit over risk in the run up to the crunch, according to a new report.
Britain's bankers have been slammed in a plainly-worded new report from the Treasury committee. Released today, the document describes bank executives as the "principal authors in their own demise", in the wake of the credit crunch and economic downturn.
The MPs' group said that many financial services professionals prioritised short-term profits over risk and did not impose tight enough credit criteria on customers prior to the crisis - and had a "misplaced faith" in now-devalued complex financial instruments.
Since the beginning of the crunch in 2007, Northern Rock and Bradford & Bindley, previously two of the most aggressive lenders, faced collapse and had to be nationalised. Government bailouts also saw significant equity stakes being taken out on behalf of the taxpayer in RBS, Lloyds TSB and HOBS - with the latter two now merged as the part-nationalised Lloyds Banking Group in a deal backed by the Treasury.
John McCall, chairman of the committee, said: "We have experienced a comprehensive failure of the banking system at all levels. The banks have failed to govern themselves effectively: senior managers failed to understand the investments being made in their name; risk management and due diligence were seemingly ignored; and the non-executive directors, often eminent and hugely experienced individuals, failed in the proper scrutiny of the banks' activities."
The committee's report met with a strong response from the banking industry today. The British Bankers Association (BBA) suggested that the MPs "move beyond blaming" and instead help with efforts to promote economic recovery.
BBA chief executive Angela Knight added: "The committee has sadly sought headlines in this report ... If we simply continue to blame the industry for all of the problems of the economy in the UK it will do little to help us out of the recession and will further damage the UK as an international financial centre."
