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Former banking bosses say 'sorry' Former banking bosses say 'sorry'
(9 minutes later)
The former bosses of the two biggest UK casualties of the banking crisis have apologised "profoundly and unreservedly" for their banks' failure.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.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.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.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".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 gainPersonal 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 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.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.Sir Fred Goodwin said he had taken no bonus that year, but that he had taken home a salary of £1.46m.
SIR FRED GOODWIN Former chief executive, RBS, 50Salary: £1.3m plus £2.9m performance bonus (2007)Born and raised in Paisley, near GlasgowResignation announced in October 2008 LIVE: Bankers grilled by MPsSIR FRED GOODWIN Former chief executive, RBS, 50Salary: £1.3m plus £2.9m performance bonus (2007)Born and raised in Paisley, near GlasgowResignation announced in October 2008 LIVE: Bankers grilled by MPs
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.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."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.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."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.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 cultureBonus culture
Mr Hornby conceded that the culture, where bankers can receive many times their salary in cash bonuses, did need to be looked at.Mr Hornby conceded that the culture, where bankers can receive many times their salary in cash bonuses, did need to be looked at.
SIR TOM MCKILLOP Former chairman, Royal Bank of Scotland, 65Salary: £750,000 (2007)Resignation announced in October 2008SIR TOM MCKILLOP Former chairman, Royal Bank of Scotland, 65Salary: £750,000 (2007)Resignation announced in October 2008
"The bonus system has proved to be wrong. Substantial cash bonuses do not reward the right kind of behaviour," he said."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.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".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.It is "hard to say that remuneration was a cause [of the bank's problems]," he said.
Huge lossesHuge losses
Sir Fred oversaw a number of acquisitions that made Edinburgh-based RBS one of the world's biggest banks.Sir Fred oversaw a number of acquisitions that made Edinburgh-based RBS one of the world's biggest banks.
ANDY HORNBY Former chief executive, HBOS, 42Salary: £1.93m, including bonus and benefits (2007) Joined HBOS from Asda in 1999Resignation announced in October 2008ANDY HORNBY Former chief executive, HBOS, 42Salary: £1.93m, including bonus and benefits (2007) Joined HBOS from Asda in 1999Resignation announced in October 2008
But his takeover of 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. 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".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 added. "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.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 rideNo easy ride
The ex-bosses of HBOS also admitted mistakes.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.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.
LORD STEVENSON Former chairman HBOS Salary: £821,000 including benefits (2007)Resignation announced in October 2008LORD STEVENSON Former chairman HBOS Salary: £821,000 including benefits (2007)Resignation announced in October 2008
"The fundamental mistake of HBOS was the failure to predict the wholesale collapse of the wholesale markets," he said."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.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.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 was indeed the root cause of the problem. 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."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.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.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.The bosses still in place at the helm of Britain's leading banks will appear before the Treasury Committee on Wednesday.