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Not quite the full sorry

Robert Peston | 14:27 UK time, Tuesday, 10 February 2009

Apologies carry weight when they are accompanied by a clear explanation by the miscreants of what they did wrong and why.

And the problem with the sorries uttered by the former bosses of Royal Bank of Scotland and HBOS is that they lacked a detailed account of why they did what they did.

Mistakes were admitted - but motivation was glossed over.

Sir Tom Mckillop and Sir Fred Goodwin of Royal Bank of Scotland both conceded that buying the toxic rump of ABN after the start of the credit crunch in the autumn of 2007 was a howler of the first order.

Lord Stevenson and Andy Hornby of HBOS admitted their bank had become too dependent on unreliable finance from wholesale markets and had lent too much to property and construction companies, among other things.

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.


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  • Comment number 1.

    Exactly right - this needed saying.

  • Comment number 2.

    Apologies only count at that level when backed with resignations from ALL concerned. Instead, they play a shell game with other insiders. Keep looking for the common ground, the current set are all from Citibank, so having given half the UK away to the Spanish, HMG's just given the remainder away to the Yanks.

  • Comment number 3.


    The bankers are apparently unable to grasp the fact that there are systemic failures in banking in the UK - that risk evaluation is clearly poor, that it isn't wise to rely on unrealistic methods for asset valuation, that derivatives are inherently more risky, that lending is an essential obligation of banks, that 'light touch' regulatory regimes don't have to mean brainless decision making...

    Part of the problem we face is that there is a whole culture here that needs replacing, but we have replaced one set of failed bankers with others of the same ilk. What we need is new blood, new ideas, new regulatory and supervisory frameworks, and above all a new approach to banking and, actually, the rest of the financial services sector.

  • Comment number 4.

    Why do these people still holding the Title "Sir" for apparently lifetime achievements and contributions to the Financial Services industry?

  • Comment number 5.


    Yeah, and the rest!!!

    1. These bankers should be persued to bankruptcy!
    2. These bankers SHOULD go to JAIL!
    3. This won't happen cos el gordo and comical ali made a killing out of it all!
    4. Too many snouts in the trough taking far too much has caused this!

    Oh, I HATE bankers!

  • Comment number 6.

    10 He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.
    11 When goods increase, they are increased that eat them: and what good is there to the owners thereof, saving the beholding of them with their eyes?
    12 The sleep of a laboring man is sweet, whether he eat little or much: but the abundance of the rich will not suffer him to sleep.
    13 There is a sore evil which I have seen under the sun, namely, riches kept for the owners thereof to their hurt.

  • Comment number 7.

    The strict answer is that they all think short-term, but contingent instruments must be examined on a case-by-case probability-tree basis in the short, medium and long term.
    Options make that a non-zero-sum game. We don't study the mathematics of error propagation sufficiently to understand all the interplays between that, the error deviation of stochastic models like Black-Scholes, and the double-dealing of closed markets to be able to anticipate the possible downside.
    Or, in simple terms, they played the Sorcerer's Apprentice at level one, when the game simultaneous ran to at least three levels (interplay of portfolios and fixed competition being the others) which they never started to understand.
    Or in plain English, they twisted themselves.

  • Comment number 8.

    I think I'll run myself into bankruptcy, where do I apply for tax payer support? Where is the form Robert?

  • Comment number 9.

    I dont give a damn if they apologise, the damage is done and they have been given a free hand to walk away without consequences and spend their days on the golf circuit.

    These people have caused untold misery to many hard working and innocent peoples in the UK and profitted as a result of this misery.

    They should be in prison plain and simple, no about of mea culpa is going to change that fact.

  • Comment number 10.

    Why aren't these guys in front of a judge in the high court?

    They deliberately misled shareholders as to the nature of their banks' accounts during the numerous rights issues, allowing shareholders to throw good money after bad.

    As I understand it, this is illegal. Where are the shareholder class actions against these banks?

    One law for the rich and powerful and another law for the plebs.

    Privatised the profits and are now well and truely socialising the losses. Maybe thats why the Labour Party are known as socialists!

    Happy days!

  • Comment number 11.

    Hi Robert,

    Saying sorry is just not good enough, what exactly do these guys do for these overinflated salaries, apart from destroy our economy?

    Regarding the probe into bonuses, is anything likely to change as the last 2 recommended little or no change in the city and should the probe be headed up by an ex investment banker.

    I do not know if you have written anything about this but it would be interesting to read your comments on that aspect.

  • Comment number 12.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 13.

    Everyone has missed the point.
    The FSA never regulated to achieve a zero default.
    Risk by definition means things can go wrong.
    The failure of Lehmans and thus non-interference by the US government as well as its speed was not anticipated
    If HBOS and RBS had paid no taxes over the last five years they would probably still be around today.
    Qualifications of the senior people would have made things worse. Look at Equitable Life (and the actuaries who ran it) and for that matter James Crosby. If products are too complex then needing qualifcations to understand would make things worse. Also trnsparency is irrelevant if you need qulaifcations to understand things.
    By the way, what are the qualifications of Messrs Brown Darling and Osborne? Ken Clarke and Vince Cable seem to know what they are doing and are exempt.
    Finally risk does not stop disasters - non-life insurance has had many big disasters and insolvencies but most companies keep going.

  • Comment number 14.

    I think a large part of the problem is that the rocket scientists started to believe in their own hype too much.

    Packing sub-prime mortgages into CDOs makes sense on paper. The trouble is when people have borrowed money they can never repay they will default - there is no "if" in the equation, the only question is WHEN they will default.

    Throw in a load of similar basket-cases of borrowing and it's clear that these things had to turn sour sooner or later. Ultimately no matter how many clever layers and estimates of correlation the quants come up with, if someone with no job, no income and no assets borrows money they will default on their loan. If a million such people take a million loans then sooner or later there will be a million defaults.

  • Comment number 15.

    Perhaps better to reiterate here, what could be the mens rea - guilty mind, in this episode supposing the crisis resulted from a situation where there was no malicious intent. If it was reasonable for these CEOs to undertake the ventures you raise, Robert, then they will not have liability. But if much capital was risked and adverse conditions were predictable, they might well be found liable by a jury. The courts should be watching this one quite closely.

  • Comment number 16.

    ....and the thing is, they were warned

    You are right Robert, the aplogy would be fine if they admitted what their mistakes were. But they did not. Instead we just got waffle.

    Unfortunately, this was entirely to be expected. Admission of any guilt would be a sign for them to be sued by shareholders - on this account they served themselves well by giving away so little to the committee.

  • Comment number 17.

    They should hang their heads in shame at what they've done to us all - our kids will be paying the price for this greed and stupidity for years to come.

    Our elected representitives are jointly responsible for this situation and should acknowledge this by calling a General Election to allow us to call them to account for their inaction.

  • Comment number 18.

    Arrogant apologies with fingers crossed behind their backs.

    Now we have apologised, so we won't be punished, we don't have to explain, and we get to keep our bonuses ...

  • Comment number 19.

    Thanks Robert for another blog of "How did they mess that up?" without any mention of the fact that three UK regulators, numerous international regulators and governments and practically every journalist and economist including yourself failed to see exactly the same thing.

    The ABN Amro transaction had almost every bank bending over backwards to get involved but has gone on to symbolise the folly of believing cheap debt will always be there. But at the time - nothing came from any source to suggest it was the wrong thing for RBS to do and rather the BBC and others decided to focus on how great it was to see British banks dominant.

    Each one of us thats taken out a loan or a mortgage that wasn't absolutely necessary is at fault so rather than continue to blame easy scapegoats and offer nothing more than soundbites like "so we can design a sounder, safer financial system", try providing some positive input to where the solutions lie.

    Difficult I know, when the leaks from the Treasury aren't so forthcoming.

  • Comment number 20.

    This has been a classic case as expressed in many if not all all unmesured close communities:-


    “A mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members' strivings for unanimity (conformity) override their motivation to realistically appraise alternative courses of action”

    Symptoms of Groupthink include:-

    Illusions of Invulnerability –creates excessive optimism and risk taking.

    Self Censorship – dismissal of ideas which deviate from the consensus.

    Rationalising warnings – dismissing warnings that might challenge groups assumptions.

    Assumption of Morality – causes members to ignore their actions.

    Mindguards – individuals who shield reality.

    Negative Stereotyping – those who oppose are weak, evil, disfigured, impotent, stupid.

    Unanimity Illusion – silence is viewed as agreement.

    How many of the above can be identified as being appropriate to the failed Management of our Banks?? Or more importantly how do we now ensure that the correct controls are in place to ensure that this scenario is not repeated. Answer = structured regulation.

  • Comment number 21.

    Deja vu?


  • Comment number 22.

    Excellent stuff Robert.
    It's about time the public found out what's been going on in the City, and where all their money has gone.
    Keep the pressure on, RP.

  • Comment number 23.

    Thanks for the apology chaps - now here's what should happen.

    The majority of the assets 'belonging' to you and your responsible subordinates paid for by gambling over the last 10 years of your tenure should be seized by the government to partially pay back the burden we'be all been lumped with. From the figures we've been reported, that's not an inconsiderable sum, And I'll be kind - each of you should be left with 200K to start your new life.

    As we keep on hearing what geniuses you are, I'm sure none of you will have a problem turning that 200K into a few million within a few years in the volatile market you've created.

    Or haven't you got the stomach for such a challenge?

  • Comment number 24.

    Some interesting historic prophetic words from Habbakuk 2 that, once cultural differences from 2600 years ago are accounted for, seem strikingly relevant. See what you think below (a little long but worth the read):

    Then the Lord replied:
    “Write down the revelation and make it plain on tablets so that whoever reads it may run with it.

    For the revelation awaits an appointed time; it speaks of the end an will not prove false. Though it linger, wait for it; it will certainly come and not delay.

    See he is puffed up; his desires are not upright – but the righteous will live by his faith – indeed, wine betrays him; he is arrogant and never at rest.

    Because he is as greedy as the grave and like death is never satisfied, he gathers to himself all the nations and takes captive all the peoples.

    Will not all of them taunt him with ridicule and scorn, saying,

    “Woe to him who piles up stolen goods and makes himself wealthy by extortion! How long must this go on?”

    Will not your debtors suddenly arise? Will they not wake up and make you tremble? Then you will become their victim. Because you have plundered many nations, the peoples who are left will plunder you.

    For you have shed man’s blood; you have destroyed lands and cities and everyone in them.

    Woe to him who builds his realm by unjust gain to set his nest on high, to escape the clutches of ruin!

    You have plotted the ruin of many peoples, shaming your own house and forfeiting your life.

    The stones of the wall will cry out, and the beams of the woodwork will echo it.

    Woe to him who builds a city with bloodshed and establishes a town by crime! Has not the Lord Almighty determined that the people’s labour is only fuel for the fire, that the nations exhaust themselves for nothing?

    For the earth will be filled with the knowledge of the glory of the Lord, as the waters cover the sea.”

    The good news is that genuine repentance backed by action is probably all most people want to hear. Lip service however is perhaps not the answer. Only they will truly know which applies. For their own sakes I hope for the former.

  • Comment number 25.

    I find it quite funny to see these over rated overpaid figureheads saying sorry for something which they do not even understand.

    If they had understood the business they were in they would have seen this crisis months in advance.

    They didn't and relied on those who presumably did but didn't dare tell them.

    Who wants to be the messenger?

    Perhaps what we need now are people at the very top who understand the business they are in not executives from unrelated companies plucked out of nowhere and given monstrous sums of money because they network with the right people.

    They and the politicians were all sucked into La La land but this sure is providing a rude awakening for them now.

    The saddest thing to come from all of this is that it is the ordinary people that suffer

    Those to blame should all be put in the stocks and publicly humiliated Far cheaper than expensive and lengthy enquiries

    A small price to pay for ruining so many lives.

  • Comment number 26.

    They are like the generals from world war one, their ineptitude and mistakes cost the lives of millions of good servicemen, but after the war, the generals went back to their manor houses and ended their time in old age and comfort, whilst children grew up never knowing their fathers, widows living in poverty.
    No sorry is not enough, I hope and prey they pay the price in the next life, KARMA.

  • Comment number 27.

    Nor did they explain why their foresight was so pitifully lacking. The nearest to a reason emerging from the sorry spectacle was that as soon as an HBOS risk manager spoke out, they fired him.

    It wasn't difficult to see that their vulnerability to a collapse of a bank like Lehmans (as actually happened in 2008, of course) needed to be analysed ahead of time: see for example this comment of October 2007.

    None of the MPs asked why they first him, by the way.

  • Comment number 28.

    These people should be ashamed.

    Quite frankly, I don't see why their entire bonus isnt retracted.

    Secondly, how is their bonus larger than their yearly salary in the first place?

    What a disgrace.

  • Comment number 29.

    Despite all the apologies the wider economic issues have still to be addressed - how did we ever get to a situation where it was acceptable to grant mortgages to people on massively inflated house prices. Gordon Brown as Chancellor and now as PM has also got some serious questions to answer. Unfortunately, there is no way he'll be made to front up to a select committee to answer his critics.

  • Comment number 30.

    Sorry Robert, but your analysis falls slightly short. The bankers cannot apologise to a parliamentary select committee because it would be apologising to the very people who are actually to blame.

    The sad truth of the matter is that it is not the bankers to blame in this instance. I know that's a controversial view, but please hear me out...

    Banks have been lending money recklessly, its true, but only because we have been demanding it. The fault for this recession/depression and for the Credit Crunch lies with all of us, not with a few individuals who made a great deal of money as a result. It is all of our collective folly that we are in this mess and we won't learn any lessons at all unless we all wake up and acknowledge that fact.

    Can you imagine how the media would have reacted in 2006 had the FSA, Bank of England and the Government acted then and said to Northern Rock "Sorry, but you have got to stop this ridiculous lending and get back to sensible banking." There would have been uproar. The Sun would have run a headline saying something along the lines of "Fat Cat Bankers Stop Hard Working Brits Buying Houses - What A Bunch Of Merchants" and the reaction from the rest of the media would have been similar, though generally less laden with innuendo!!

    The simple fact is that we created this problem, not the banks. They have spotted a gap in the market and exploited it. The real problem is that that gap was ever created. And for that, we are all, collectively, responsible.

  • Comment number 31.

    Now that you've sorted out the nasty bankers Mr Peston, let's see if you can get an answer to the question of how it's unacceptable for a banker to fill his pockets yet it seems to be acceptable for a cabinet minister to do likewise. I know £114,000 pales into insignificance beside Goodwin's £4 million, but it is the taxpayers money. ( Or was till Jaqui trousered it.)

  • Comment number 32.

    Your earlier post suggested this lot were to be grilled.
    I would suggest lightly poached was a more apposite expression for the proceedings.

    You have nailed for once the crux - they really have no idea what they are sorry for doing.

    The most telling answers are that they declared spending vast sums of their 'personal' wealth on their own banks shares on top of the bonus options and have lost a bundle as a result.

    They obviously thought it would be a good investment so clearly had no idea what the underlying risks to their businesses actually were.
    Thus what I think they are sorry for is being ignorant and failing to understand fully the businesses which they were handsomely paid to direct.

    Sadly stupidity on this scale is not a crime.

    I query though why anyone would want to employ any of this lot in a consultancy role - if they didn't understand what they were doing - what use are they in undoing it.

  • Comment number 33.


    As I just posted on your previous banker's bonus report, many of us have concluded that this great anti-bank bonus campaign is nothing more than a smoke-screen and a sham, designed to take the spotlight away from our govt's inability to even begin to get a handle on the economic crisis we are sliding into.

    I don't like the banksters, and this particular Gang of Four is despicable IMO, but if this self-serving game of gov't charades goes on for much longer then I'd almost be tempted to set up a new-style charity RSPB


    but only almost; not quite!

    The British gov't, having found themselves a useful scapegoat, will have no intention of bringing any prosecutions against these people because all sorts of highly inconvenient information would come out about the abject failure of govt and regulatory agencies to do their jobs.

    We will only start getting some real answers about the banks when the US authorities begin bringing prosecutions over there. And I strongly suspect that the US authorities will proactively pursue prosecutions, as the new administration will force the SEC to grow some teeth!

    Can you now move on to some of the bigger issues or at least a different argument that Brown and Co aren't to blame? Perhaps you could concentrate on the GLOBAL aspect of it all for a while for instance..........

  • Comment number 34.

    I think a good example is called for here.
    A manufacturer buying materials in forwards from overseas wants to buy the foreign currency at the current forward rate or better.
    However, he's dealing in a volatile market and leaving it could be disadvantageous, so he buys a call option on his currency exposure. The bank lays that off against the dollar. Look up wiki for the graphics.
    Let's start putting some figures into that model.
    The current 1-year forward rate on the Euro is .8927, so we'll take that as our at-the-money strike. The bank lays that off either against its own book or into the markets via the dollar at 1.4576 on the sterling leg and 1.3012 on the euro leg.
    In a year's time, the spot price turns out to be, mirabile dictu, 0.8927, so the option doesn't trigger. However, the bank can show big profits. Any ideas why?

    This is because the currencies can move against the dollar, one heavily upwards and the other heavily downwards. One was capped by the lay-offs into the markets, the other yielding sheer profit.

    Now, the guy who's got the original exposure decides to take that for himself. The bank is stuck with the risk, now. The guy then sells the cross-currency option back into the market, he's not interested in manufacturing any longer, it's much more fun making the market twist itself. And so the banks end up payng him a very nice little no-risk pension, which they never notice because it's nowhere in their models. The ex-manufacturer pays a 5% premium up-front, and gets a 30% profit 20% of the time, ie 6% absolute, less the 5% premium is 1%, or on the minimum option of 1m, 10k each time he does it, and he's doing it a dozen times a day. He's riding the volatility as a hedge trader now. And stochastic models miss that completely.

  • Comment number 35.

    Robert Peston for Prime Minister

  • Comment number 36.

    When are the FSA going to be interviewed?

    Their governance between their inception and 2003 during which their head was given a knighthood included allowing the banks to ditch liquidity ratios and operate in areas totally alien to banking to say nothing of Equitable Life defies belief.

  • Comment number 37.

    If the banking bosses haven't done anything illegal then the responsibility actually falls squarely on the shoulders of our lawmakers, who have failed to regulate and control the activities of the banking industry as a whole.

  • Comment number 38.

    Robert Peston - have you ever asked yourself or anyone in the industry what part the auditors had to play in this mess? PWC and others must have been at the very least complicit and the very worst incompetent in merely signing off on mark-to-market valuations and risk assessments in the bank's balance sheets. It's no good blaming the regulators if the accountants weren't able to pick up some of the danger signals and at least sign off accounts with reservations!

  • Comment number 39.

    Wise words. Just noted that RBS is to cut 2000 (back-office) jobs - a more equitable remuneration system, particularly curtailing those bonuses, could have saved many of these posts.

  • Comment number 40.

    The banks were quite happy to take on sub-prime debt as they (and Gordon Brown) were of the opinion that house prices would continue to rise.

    If the sub-primers defaulted then the property would give the banks a nice profit. History lessons never learned.

    125% morgtages happened under Gordon Brown's watch.

    Northern Rock had to be nationalised as a result. Gordon Brown allows the tax payer to fund bonuses to NR staff but thats ok, he's very angry about it.

    He should also apologise and then resign.

  • Comment number 41.

    Sorry, #30, but some of us were onto them way, way on back. So HMG put in the FSA. Who they staffed with insiders. So we were still stuffed. That does not make this OUR responsibility, some of us ceased identifying with the Government long, long ago.
    And, worse, we're complaining again, so what do they do? Provide cover from UKFI. Which they man with insiders. Do I have to hold our a fleshlight to show you what's going on?
    This is groundhog day with knobs on. We're learning, though, we're learning.

  • Comment number 42.

    There is a simple answer -- 'GREED'

  • Comment number 43.

    A lot of the points raised by Robert Peston would have been caught by proper quality regulation of the banks.

    I believe it is relevant, that the banks that majorly failed all have or had their headquarters a long way outside of the M25, mainly in the North East and Edinburgh.

    Is it a reflection on the regulatory role of the FSA that they were in some way unable to form a working relationship with banks not run from the City and thus failed to regulate them in the manner they did others.

    Lloyds (prior to HBOS merger) and Barclays whilst in need of some help seem to be in much better overall shape than the others.

  • Comment number 44.

    Robert - you suggest that the bankers hinted that bonuses were part of the motivation for the bank problems.

    On the contrary, it was specifically said (I think by the former HBOS Chairman) that excess wholesale borrowing was the problem and that bonuses did not drive this excess wholesale borrowing.

    So it was claimed that bonuses were not a cause of the problem.

    However, it was also said (by the former HBOS CEO) that the bonus system needed to be improved but that this was separate from the issues that caused the recent problems.

    The basic problem is that banks have to lend long and borrow short (retail or wholesale funds). If solvent baks are to survive then the government must always act as lender of last resort in the event of a loss of confidence. The Bank of England/Treasury were slow and reluctant to do this and when they did, they did so in a way which was resentful and damaging to confidence - so exacerbating the problems.

  • Comment number 45.

    I was glued to nearly all of the TSC Hearing.

    I was appalled and disappointed at the quality of the questioning ( with a few exceptions).

    A lot of rather inadeqaute role playing....not much additional light shed on anything at all. Although I am sure Mr McFall is personable and well-meaning, he does not seem to me to add much to the functioning of UK Democracy.

    And this today on top of the recent Newsnight : a Roundtable of The Fab Five including his nibs, two Jags (aka Three Jaws), Mr D Buick, et al. A veritable circus of news analysis. A load of incompetents, paid I wonder how much.....including the Host who seemed totally out of his depth. (He did 'steal' an idea or two from Paul Mason...who should have tutored him more extensively before the prog was broadcast. Thank God at least for Mr Mason.)

    Summary : This important news, these staggering events, and all OUR difficulties of the future.... are being discussed and apparently analyzed by those almost toally unsure of how to analyze cirumstances for themselves let alone for others.

    And now I really would like to use some Proper AngloSaxon. But, dear reader, you'll see between the lines that I am too polite for such crass behaviour.

  • Comment number 46.

    The problem is that the problem can't really be laid fair and square at the feet of any one individual.

    Bankers were competing with each other in a commercial world where the pressure was to make greater profits every year. There is collective responsibility across the whole banking industry.

    It also that everybody in the UK has got long faces today, because the economy is not in a period of growth. We're all getting depressed about the word depression.

    Why can't the commercial world and politicians accept that unrestrained growth year-on-year is unrealistic. Things do go backwards sometimes. Recession is not the end of the world...

    Bankers and Politicians should perhaps be more realistic about their expectations for the economy in future, just as Chelsea should accept that they can't expect to win everything every season. Sometimes they will finish 4th in the Premiership and be beaten finalists in the cups. But by any reasonable standards that still not too bad...

  • Comment number 47.

    That said sorry but so what?

    How has this exactly impacted on them - they have enough in the pot so that they don't have to work again. Just like the position of the cabinet - can't see them apologising in the first place though.

  • Comment number 48.

    It seems as though everyone is blaming the sods at British banks when this crisis is very clearly a global item and as such you people will fail to realise it was not just Sir Fred & Co who failed. Mind you the biggest Ponzi schemes out there (aka Bank of England and The Fed) have yet to say sorry for their part.

  • Comment number 49.

    What good is this? I was always taught to make amends when I made a mess.

    Bankers, we are waiting on the amends! If you can't fix this, then turn yourself into the nearest police station and ask for a criminal investigation to be conducted into your activities.

    I signed on yesterday. The office was packed with claimants. There were at least five new advisers being shown the ropes.

    I was told of a man who sat there in the office and cried like a baby. Why? His home was being repo'd. The staff consoled them as best they could. Everyone in that office was shaken to the ground.

    The people there are working weekends to keep up with processing claimants.

    Will sorry rectify this situation? No.

    Real people are having their lives' ripped apart by this complete failure, caused not only by these idiotic bankers, but by a complete failure in regulation.

    What was that I heard on BBC News 24? Seems a risk manager warned the board what they were doing was way too crazy. He was pushed aside as an incompetent, it seems.



  • Comment number 50.

    I thought the whole idea of having these people in charge is that they knew what they were doing. ( that's what they were bing paid for). This means thy should have been able to understand the way the market was going and take the approperate action to keep the bank going in the right direction. They have not said why they did not do this!!!!

  • Comment number 51.

    Per the website TheRawStory, a group called NACA (Neighborhood Assistance Corporation of America) staged protests at the homes of CEO's of banks that are not cooperating in helping on mortgage bailouts to homeowners in forclosure. NBC reported on the story, referring to it as "Grab Your Torch and Pitchfork."
    Being an American in La Jolla, California, I read Peston everyday for a different perspective on the financial crisis and for his pithy sayings such as todays "howler of the first order. Perhaps we could get answers to his questions of accountability from these bankers if there were an equivalent group in Great Britain, willing to stand in front of the gated homes of the bankers in Great Britain. And Peston could come up with a phrase that matchs up to grab your torch and pitchfork.

  • Comment number 52.

    it is so much better to read your blog than to watch your delivery on the news. Speed it up a bit otherwise we lose concentration

  • Comment number 53.

    Robert could you please ask some questions as to why Sir James Crosby was not questioned today and his role in the banking crisis?

    Chief Executive of the Halifax from 2001 to 2006 who reputedly encouraged risk taking. He then left to become Deputy Chairman of the FSA to supposedly regulate the banks.

    Is it any wonder the FSA couldn't see anything wrong with the banks with him there? How could somebody who reputedly encouraged risk taking then see anything wrong with it?

  • Comment number 54.

    Why do we persist in blaming these despised middlemen. The drive for returns on banking shares was us, at least the many of us who have pension investments or life insurance.

    We wanted big returns so our fund grew and we wanted apparent security the banks gave us what we asked for.

    Its as though they were the bus driver and we were the unruly mob on the bus insisting the drove faster until the crash. Now we are turning round and blaming the driver and forgetting the pressure we exerted.

    Time to take the plank out of our eye rather than the splinter out of the bankers eye.

  • Comment number 55.

    to sum it up simply-one word will suffice


    They saw the shopdoor was open with all the sweets out and the shopkeeper round the back.

    You can't take what isn't yours-it has to be earned and paid for.

    Trouble was-there was a bigger sweetshop in the states with more to lose.

    They hoped they would be away before the stocktaker came back and noticed the stock loss.

    It's all about timing-they got it wrong from their personal point of view and the wheels came off the bandwagon mid trip.

  • Comment number 56.

    Call in the overdraft!

    Well I assume the government made the right contractual arrangements with OUR money.

    If the banks can get repayment on demand then so should we.

    Of course this would sort out the bonus thing.

    NewbankUK would be in operation of course to run the best bits at once.

  • Comment number 57.

    The demise of RBS is generally accepted to emanate from the mis-judged purchase of ABN Amro, a mis-judgement that Sir Fred has to answer to. However, the failure to see (or force RBS Board of Directors to see) down-side risks that would affect the UK Banking System is surely a failure of regulation?

  • Comment number 58.

    It may be a minor detail in the great scheme of things, but these "apologies" were not voluntarily offered by these failed but unrepentant bankers, but were grudgingly made when the chairman asked them in his very first question if they would now apologise. I thought the comment offered by Derek Simpson, joint general secretary of the Unite trades union was most aposite, when he said these bankers had unwillingly gone through their political grilling, so they could scuttle off to claim their bonuses.

  • Comment number 59.

    I am a middle class 57 year old, self-employed businessman. I was brought up to be patriotic and honest, to only borrow when I could repay, and to be part of the bedrock of society. I now find I have such a visceral hatred of our political class and our bankers that I have decided that I will vote for whoever promises to prosecute and imprison the lying cheating thieving crooks who have destroyed our country with their false accounting. Make no mistake, they have destroyed it. 90% of people do not have the slightest idea about what is coming. We shall have a grandstand seat at the Irish implosion, much like those who watched the first of the Twin Towers go down. When Ireland has gone bust and its population is desperately trying to emigrate we shall have a preview of our own fate.

  • Comment number 60.

    Re: 23 arabstrap_808
    I like it. Bonuses should be (long-term) performance related.

    I have a question.

    What did Andy Hornby mean when he said (regarding his remuneration)

    "I have lost considerably more money than I have been paid," ?

    Methinks he's trying to be devious, and I don't think he will score many Brownie points that way.

  • Comment number 61.


    Due to a totally unexpected 'snow event' the British economy, formerly believed to be unsinkable, has been lost without trace.

    'We think she went down part way between the City of London and Wall Street. Unfortunately we don't know exactly where or what caused the tragedy, because at the time we were concentrating on the far more important question of Sir Fred's bonus'
    said a BBC/govt/regulatory spokesperson.

    The spokesperson strenuously denied that the sinking was caused by the METAPHOR being overloaded with a TOXIC CARGO of CDOs

    'We don't even know if this collateral exists, let alone how much it might weigh, so how could it possibly sink the world's biggest and most impressive metaphor, even if it did start to shift from side to side, which we have no reason to believe happened by the way' said Commander Brown.

    Unconfirmed reports say that the METAPHOR had steered a course past the NORTHERN ROCK and was near the CITI BANKS when it disappeared near the GOODWIN SANDS.

    Ed Balls said that the sinking was the worst METAPHORICAL DISASTER since the sinking of the TITANIC; definitely worse than the LUSITANIA or any other REALLY BIG BOAT in the last 100 YEARS. SO THERE!

  • Comment number 62.

    Why did they do it? They were driven by their shareholders - virtually everyone (pre-crunch) in the country by dint of their pensions - to generate higher returns - because we are all interested in that. And more importantly the pundits - i.e. Mr Peston et al for not making the right return on capital employed.

  • Comment number 63.

    It is blatantly obvious that the banks are being reactive rather than proactive in their actions to apologize at this late date. It is rather like a naughty schoolchild who has been chastized by their parents over an indiscretion. This apology is merely a reaction to many a media outlet demanding an apology.....therefore it is meaningless.

  • Comment number 64.

    Re: 55 notsodumbtyke

    Well done.

  • Comment number 65.

    The main problem is that no one at the top of the banks, or governments, actually understood what was going on.

    Or maybe they did...

    If anyone did understand then an apology would not be enough. Summary execution would seem more appropriate.

  • Comment number 66.

    Will someone please inform me what a bonus is or looks like ?

    Certainly hasn't happened where I work and i'm not sure how it could be "earned".

    If it's for making mistakes like I am led to believe-I should be rich !

    Ooops-did i say that ?

  • Comment number 67.

    Watched Act One of the craziest farce in town "Calling all Top Bankers , Past and Present, to
    the Star Chamber." Can't wait to see Act Two. Who will be the first to lose his trousers ? And
    will there be an Act Three?

  • Comment number 68.

    54 simondgoodfellow

    I am not sure.

    As an individual or a group I am not sure you can make the driver go faster. He has to be willing and able to do that in the first place.

    Yes we all wanted a top return but the investments were surely obtained by selling to the investor?

  • Comment number 69.

    Id be ever so impressed with this hammering of the bankers Robert if it wasn't for the fact that you are incapable of taking to task the main culprits, the labour government

    Its a matter of hear see and speak no evil as far as they are concerned on this blog

  • Comment number 70.

    Nearly right, #24 - it's actually worse than that, or better for some.
    Go research the best-known graphic on your subject, found in St Bavo's Ghent. That has a brother painting in the Prado, by the same artist, which portrays the end of your posting. The brother painting was recently redated to 1435, which is the same date as a Papal Bull establishing the Chapel of the Lamb. That chapel is in the course of being abandonned, and the Lion lying down by the Lamb appears by documentation to be the real thing. Now, I was reestablishing contact with the world's leading expert in those paintings, who is checking the association, having given it his tentative approval in the absence of his reference works, when I found all my old fellowship surfacing around me, and you know how old Rahere is. Such coincidences aren't coincidences in my experience, this thing's going for the end game as Abbot Malachy said and so you really owe it to the folks who want to follow you to complete the job. If you want that repentance you called to be real it has a prerequisite, confession in faith, not to a priest but to the One Habbakuk's speaking on behalf of.
    Rahere's being gnostic again, I hear the cry. Go do some thinking, if you want to ask Rahere about the symbolism I'm not on Dead Journal.

  • Comment number 71.

    Assuming this quote from Andy Hornby, former chief executive of HBOS is accurate then Mr Hornby is either utterly disingenuous or a total buffoon which explains why his bank failed :-

    "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.

    How on earth can you be given (i.e. zero cost) something and lose money by having it? Even if the quote isn't accurate and he was given options that he bought and that then went down in value below the option price, that my utterly overpaid, squirming fellow is what is known as investing. It is what normal people have to do.

    Quite why executives think that a culture that feeds them bonuses based upon shares that float in a dreamworld market of manufactured value is not going to lead to short-term practices to over-leeverage and inflate said value is beyond the understanding of rational people.

    But then executives aren't rational and 40 million taxpaying Father Christmas's had to magic themselves into existence to rescue their mistakes.

  • Comment number 72.

    I think it is probably irrelevant if they do not tell us where they went wrong. The key point is we do not want these incredibly incompetent people in any part of the banking system. This will though work out quite nicely, indeed we can kill two birds with one stone:- first we with hold all their bonuses, then, if they carry out their 'threat' and leave their jobs in droves, we get rid of them for good as well. This is win win in my book. Let us not worry about their perception that they need a bonus system to 'hold on' to these rocket scientists - the quicker e get rid of them all and bring in fresh blood (competent at a push but tightly regulated will do)

  • Comment number 73.

    Ah, can we post non-metaphorically now, Mr Moderator? Kill this one if no, pass it if yes, you'll be forgiven as you're the unseen hand.

  • Comment number 74.

    There is still the point of view within the city that a very large salary and bonus is justified for these bankers in order that business can attract and retain "THE BEST" !!!!
    Could Mr Peston please ask some city movers and shakers a question "How exactly would you define best...?

  • Comment number 75.

    Interesting. I wonder whether the remuneration at this level really does govern behaviour in the way Robert suggests. It feels as if the bankers are in a Catch-22.

    If they say that their remuneration structure did encourage the behaviour that they are apologising for, then it means they need to look at it and redesign it. On the other hand, if the pay structure did not influence behaviour, that eliminates a major rationale for its existence.

    An update item here about the rationale for bankers' pay structures:

  • Comment number 76.

    Re:64 expatinthenetherlands

  • Comment number 77.

    Their sorry!


    No their not!

    Their not sorry for making themselves so very very rich at the expense of everybody else, not only in regards of the monies we know about - do you honestly believe these people have no undeclared assetts and off shore bank accounts!

    They have not offered to pay back monies and try to make any amends whatsoever.

    They can not give a reason for their motivation to pursue the policies and strategies that they pursued?


    So we are to swallow that these people have not reflected on this matter and learned nothing - become rich beyond belief from the pain of Joe Public - but they are sorry!


  • Comment number 78.

    Robert, Surely you know that some of this is Fraud, Collusion, Negligence, and Fiduciary Mismanagement. It always happens that, when the possibility of being sued or worse comes up, these geniuses paid great sums of money plead imbecility and being out of the loop. The other cause were the implicit guarantees. How do you expect these people to admit that they took great risks because they knew that, ultimately, the taxpayers would pay the bill.

  • Comment number 79.


    I couldnt agree more..... its easy to point out the obvious after the event.

    And, oh how the masses revelled in their supposed 'genius' for making killings from playing the property game

    Over a decade average house prices rose from £55k in '97 to £172k in '07 (12% vs GDP of 3%-4%). And what was best was that we managed to magic this 'wealth' out of thin air. Clever eh?

    Did we not look around the rest of Europe and think it might be a little odd that we were the only ones borrowing more and more and more and inflating prices higher and higher and higher.

    Everyone should accept the fact that WE (and the govnt) are all to blame just as much as the banks - we all went to the party and now we're enjoying the long long hangover.

  • Comment number 80.

    Robert, please ask the questions put by newProtectorCromwell on your earlier blog today:

    The bankers should be asked, one by one:

    (1) What is the size of your bank?s gross external debt?

    (2) What is the annual interest on this debt?

    (3) How do you propose to pay the interest and repay the capital?

    Everyone should read his comments, made in the last couple of days, as they show the horrifying position this country is now in.

  • Comment number 81.


    This bankers thing is a sideshow. We are in the mire. The IMPORTANT thing is to find a way out before we sink too far.

    Then you can go back to skinnning the bankers.

    Peston start addressing the REAL issues of the Depression

  • Comment number 82.

    Re:64 expat sumwer(safe ?) abroad.

    Cheers ! thanks yr comment

    I'd buy you a pint but can't afford it old bean and besides-you are too far away.

    Bit like these banker types except they had a few fairies for company.

    Tip:stay where you are cos we've run outta tin hats over here.

    They've just put beer up 10p pint in my local club and they blame it on the banking crisis !

    Yes indeed-they have a lot to answer for these chaps.

  • Comment number 83.

    It is about the Pricing of Risk

    Plainly what they did wrong was the long term miss-judgement of risk. Even now they seem not to understand this. If the risk management systems had been working properly the banks would have had far more understanding of the level of risks they were undertaking and would have been able to price for them appropriately.

    (That is if they are not lying about not knowing what they were doing - and it is probably fair and wise to give them the benefit of doubt in this matter.)

    It is my opinion that their style of management also contributed to the culture of miss-management.

    Many people all around the World miss-estimated the risk of the packaging and multiple repackaging of loans - however it is not true to say that there were no warnings - just that they were ignored - again due to the style of management.

    It is also reasonable to blame the culture that said that loans were affordable and that was all that mattered - that is, that it did not matter that the loans were for very high multiples of income. This culture gave rise to the whole sub-prime loan business - without which we would now still have a stable and functioning global economic system.

    This is precisely the same area as I and many others were warning the Bank of England and the Treasury about for most of the last decade. All of the people who did not listen and rejected the logic of our arguments are culpable, that is the Banks, The Bank of England, The Treasury etc. Their arrogance directly led to this disaster.

    But enough of the past -

    We vitally need to say where we are going and what is important, vis sound and valuable money - interest rates up so that both savers and borrowers get and pay their fair share for capital. Without this there is no recovery and anybody that claims that returning to the disastrous policies of the bubble economy will fix anything is a dangerous fool.

  • Comment number 84.

    Torches and pitchforks number 51? Are we now advocating lynch mob justice? Have we gone mad and lost all perspective on the world? And all the people calling for our ex-bank CEOs to be jailed - what for exactly? last time I checked they had done absolutley nothing illegal. Upsetting the ill informed and over emotional masses of the UK isn't, unless I missed something, a crime.

    People need to grow up, stop moaning and start looking ahead not back. We have all lost out. Nice to see some reasoned blogs coming through now. The government (Brown / Darling - you know who you are) need to step up and start accepting their part of the blame. And everyone that thinks 4 individuals are to blame for a global crisis needs to do a bit more reading on the topic before letting their thoughts out.

    We were all happy (government included) to take the cash when the banks were throwing it as us - loans, dividends, corporation tax, etc.

    Don't forget
    1) We seemed to have fogotten that loans need to be payed back. Living beyond our means is not a good idea. Just because banks offer cheap credit doesn't mean we have take it and we should be responsible for our own financial decisions.

    2) The value of investments can go DOWN as well as up. Pensions down, ISAs down, income down, profits down, tax revenues down. That's life as they say.

  • Comment number 85.

    I would just like to point out that we had been warned about all this as early as 1597, which if my memory serves me correctly, even predates Thatcher:

    ' Why, yet it lives there uncheck'd that Antonio hath a ship of rich lading wrecked on the narrow seas;

    the Goodwins, I think they call the place;

    a very dangerous flat and fatal, where the carcasses of many a tall ship lie buried, as they say,

    if my gossip report be an honest woman of her word. '

    (William Shakespeare; The Merchant of Venice, Act 3 Scene 1)

    be warned Ed Balls, Will Shakespeare could turn a mean metaphor or two when he wanted!

  • Comment number 86.

    Why did they do it?


    Can't anyone else see this system of Capitalism is an exponentially expanding system which continously requires re-invention to stop it collapsing?

    Goodwin is right, bankers will go elsewhere if they don't get paid enough - that's competition for you (a Capitalist feature).

    This WILL HAPPEN AGAIN, it matters not how sorry they are, it will not stop happening.

    Just think about how we got here logially for a minute. Banks are competing against each other - competition means they have to continuosly find ways of beating their rivals.

    This means smaller margins, higher volumes and bigger risks.

    There is no avoiding it - and if Robert thinks that
    "But it matters that we learn the lessons, so we can design a sounder, safer financial system."

    ....then he is a fool - because this is EXACTLY what was said in 1990 by the bad men of that day.

    "Motivation was glossed over"

    Am I the ONLY person in the world who can remember 20 years ago? Has everyone else had their brains lobotomised or something?

    Peston - ask the right questions of the authorities.

    1) Why does this keep happening?
    2) What are you going to do to stop it?

    I am about to give up - I cannot watch this car crash Economy any longer.

    Either admit that boom and bust is here for as long as Capitalism is around, or shut up. Anyone who tells you different is either mis-guided or a liar.

    Gordon Brown, our 'leader' - picked from the best of us - doesn't know that.

    Robert - it's time you started embarrassing these idiots that pretend they know what they're talking about.

  • Comment number 87.

    I am a small shareholder (although not small to my scale) in both RBS and HBOS. Obviously I lost a lot of my money that I was saving for future in a hope to buy a flat or a small house. Big hit for me and my family.

    I am not angry with these four men. I believe they are honest and very capable people who did their job to the best of their knowledge and judgement. It was very difficult to expect collapse of Lehman Brothers, closure of wholesale money market. These two events changed everything. After the storm arrived it was more a question who is lucky one to escape with less damage. HBOS and RBS were not lucky at all. Barclays, for example, were lucky to lose ABN AMRO battle, although they were keen on it. But I still think that, for example Fred Goodwin is a very good banker who can help now RBS to rebuild itself (as a consultant for example).

    The names of these guys are now everywhere with bad comments, very harsh critisism. I am bit sorry for them.

    I agree we should learn from them but we should not blame them. Many, many people in many countries are at fault for this crisis.

  • Comment number 88.

    The main reason for their collective failure was that they did not understand the nature of the leveraged products their employees were trading in. Confessing that would mean confessing to ignorance and stupidity which they aren't going to do. A classic case of the failure to 'keep it simple, stupid'. Systems become unstable when they become so complex that the interconnections can't be seen. We humans over-estimate our ability to handle complex systems. You can't regulate what you don't understand either. And you can't govern what you don't understand, as Gordon may one day realise.

  • Comment number 89.

    As a psychotherapist I have noticed that when people cannot or will not explain why they have behaved badly it is often because they are scared and ashamed of what they have done, and are fearful of what others will think of them. The fear and shame is usually in direct relationship to their estimation of their own self importance on the 'bigger the come, harder they fall' lines. The truth is that they probably did what they did for the piles of cash and the bigger the pile of cash the more important they thought themselves to be. This is a hard thing to admit for the average Joe or Joan - how much harder for these macho big hitters?

    The four musketeers in front of the committee today all seemed to me to be in shock and showed it in different ways. Furthermore, there is a possibility that the Select Committee's questions (which in truth were pretty mld when measured against the damage these guys have done), amplified the unsettling effects of the pre-meeting training and rehearsal they had been through.
    Stevenson - hunched body shape and very nervous , like a frightened dog.
    Hornby - 'Mister Cool in a big suit' at the start but increasingly withdrawn and silent as the meeting went on. His Harvard MBA was no use to him here.
    Fred the Shred - Cowering, sweaty, tentative. If I ever saw a guy who was clinically stressed and psychologically drained - this was him. Go and get some therapy Fred - your Ferraris will not help you out of this one.
    McKillop - A scientist and mathematician and the least permeable of the lot - likely to have the the most difficulty in coming to terms with this I would guess though he did make something of a start by admitting that he didn't 'completely' understand the SIV's and leveragings he had been playing with.

    And the public opprobrium isn't finished for them yet - immediately after the session the RBS announces that 2,300 jobs are to go across the country. I guess they thought it would be a good day to bury the job losses which again shows how recalcitrantly unrepentant they are.

  • Comment number 90.

    Good old Ed Balls-tell it as it is !

    Certainly makes Mr.Darling/Brown et al look like shrinking violets.

    Doesn't quite imbue a ring of confidence in the ability to see us through the mire at this present time.

    Perhaps he should be out with the cart crying "bring out yer dead".

    Great PR however-that'll give us all something to chew on - no doubt !

    I can almost feel Gordon wincing and growling reading Ed's mecurial prophesy.

  • Comment number 91.

    Give them African trade beads or slave beads as bonuses

  • Comment number 92.

    Sorry indeed! But it's not just the banks who should be sorry but the whole government who are only too ready to fleece us. We pay tax on earnings, on what we buy, on homes, fuel and even after death our families become liable for yet more tax. No wonder we have to borrow from banks whenever we need to buy anything even moderately expensive like a car...because there is so little left.

    Perhaps some urgent re-ordering is required. Tightening of belts with less money spent on things that aren't really required (and goodness how Labour have loved those useless expensive projects like ID cards). Less money for 'consultants' brought in to advise government., fewer QUANGOS populated by has beens with snouts in the trough..just less government full stop!

    Once this inefficient money laundering operation between government and banks stops perhaps they might be good enough to allow us to keep more of our hard earned cash and allow us to deliver the stimulus package to the economy on our own terms!

  • Comment number 93.

    My albeit limited understanding of our current situation is that it is primarily due to the US sub-prime mortgage market and the financial derivatives that came about. During this mornings meeting, one of the "big four" mentioned very casually that the financial "derivatives" that HBOS and RBS had been buying into massively had been given AAA credit ratings in the US. How on earth did these financial instruments - or toxic waste, as they are being called now - get a triple A credit rating??? Who from - S&P, Moodys? Is someone guilty of a massive fraud even bigger than Madoff? Why is no-one questioning these credit-ratings agencies to ask them on what basis they gave AAA ratings to financial instuments based on the sub-prime market? I doubt whether it will happen, even in the US, certainly not over here, but I believe that there is culpability somewhere in the system and feel that only a prison sentence will send out a strong enough message from we, the public.

  • Comment number 94.

    Perhaps they knew it was a house of cards and hoped it would all go away.

    Banks have been buying their own shares for years now.
    A director buying is a sign of confidence.

    Mugs, that is us via our pensions, follow the money and buy into these rising shares.

    Options on these shares, which the senior bankers had a plenty are suddenly well into the money.


  • Comment number 95.

    Apology? More like a tipping point.....

    Fascinating things, tipping points.

    A problem here. A problem there, even a few problems together. Not to worry; the great ship of state steams on under the masterful navigation of the experienced captain.

    Them all of a sudden, that extra unexpected unpleasantness hits - and in spite of all assurances by authority to the contrary, down she goes faster than you can say "what, no lifeboats?"

    But show some backbone. The deckchairs are in immaculate order and the band is playing magnificantly.

    Oh metaphor, give service to the Prime Minister and HMS Britain.

  • Comment number 96.

    # 71 themaster

    yes Hornby's comment about losing more money than he made was strange

    it suggests he has the same silly resentments as many North London civilians; you know, the ones who go out and buy a terraced house for 300k and later see a similar one on sale in an estate agents window for 600k; 'heh I've just made 300k they say' today they sell it for 500k but instead of being pleased to have made a hefty and undeserved profit they really think that they have just lost 100k!!

    you'd expect more from the highly-trained and expensively-educated mind of a MASTER OF THE UNIVERSE

  • Comment number 97.

    re 19 -
    here here, finally an intelligent comment from someone who has thought about the wider picture, and not just following the crowd in shouting at a few bankers.

  • Comment number 98.

    Must be nearly home time for moderator-it's all slowed down again.Never mind-he ain't done so bad today,has he/they ?

    Yawn..........well,off home soon myself-listen to the good news that's bound to be on the telly(sic).

    Ah well.........there's always tomorrow,and the day after,and the,day after ad infinitum.

  • Comment number 99.

    In what census of living creatures, the dead of mankind are included; why it is that a universal proverb says of them, that they tell no tales, though containing more secrets than the Goodwin Sands...

    Herman Melville; Moby-Dick, Chapter VII

  • Comment number 100.

    I start from view that the four bankers who were brave enough to put their heads above the top of the trench are probably decent and honourable men. My guess is that given hindsight the only response they can give now is the one we all use when things go wrong which is that 'it seemed like a good idea at the time'. My view is that at the heart of this messy business the risk assessment techniques were useless or inappropriate, although I'm sure that their respective organisations spent millions of dollars/pounds/euros on this activity. For a much more elegant explanation than I can give of why this is so I recommend Nick Taleb's book 'The Black Swan'. Mind you buying ABN AMRO and investing in Madoff ought to have been seen as a risk too far without any sophisticated statistical analysis.

    I don't think awarding bonuses is a prime factor. If risky investment is not properly assessed then the risks will be taken bonus or not. This is not to say I agree with obscene levels of bonus being paid. I also believe that if bonus payments are to be any part of the future financial industry that claw back will be unworkable, will there be bonus police? what happens if in good faith you have spent your bonus and the bonus police want is back three years later? what happens to the tax paid on a clawed back bonus ? By the way I don't get a bonus now but when I did it was about 10 percent of salary and was a reasonable incentive to do a good job.


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