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Former banking bosses say 'sorry' Former banking bosses say 'sorry'
(about 2 hours 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 Fred Goodwin told MPs on the Treasury Committee he "could not be more sorry" for what 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.
The bankers were asked whether they had received any bonuses in 2008. 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 Fred Goodwin said that he took no bonus in 2008, but that his salary was £1.46m. 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.
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 that he also took no 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 by way of 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 of 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, former RBS chairman, 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 exacerbated the banking crisis, Sir Fred Goodwin argued that traders were trading within set limits, and were doing simply "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.
Prime Minister Gordon Brown has expressed anger over proposed pay-outs to other workers and said he wanted employees to consider waiving their right to them.
Huge lossesHuge losses
Sir Fred and Sir Tom McKillop, who was chairman of RBS, are also appearing before the Treasury Committee alongside Lord Stevenson, former chairman of Halifax Bank of Scotland.
ANDY HORNBY Former chief executive, HBOS, 42Salary: £1.93m, including bonus and benefits (2007) Joined HBOS from Asda in 1999Resignation announced in October 2008
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 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 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.
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 added.
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.
Sir Tom stepped down earlier this month, two months earlier than planned.
A former boss of drugs giant AstraZeneca, he apologised to RBS shareholders last year for the bank's problems.
No easy rideNo easy ride
HBOS was rescued by Lloyds and the merged group is now more than 40%-owned by the government. 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.
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
Mr Hornby stepped down from his post as head of HBOS after the takeover by Lloyds, although his position was already in doubt. He waived a big pay off when he left. "The fundamental mistake of HBOS was the failure to predict the wholesale collapse of the wholesale markets," he said.
He joined Halifax from Asda in 1999, and is credited with bringing a retailer's dynamism to the more sedate world of banking. He became chief executive of the merged Bank of Scotland and Halifax in 2006. 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 also stepped down after the Lloyds takeover and said he would not be taking any pay off. Lord Stevenson would not be drawn on the specifics of the sacking, simply saying that it had been subject to an independent investigation.
He joined Halifax as a director in 1999, becoming chairman in July the same year. After the merger with the Bank of Scotland, he became chairman of HBOS. But Mr Hornby stressed that an over-reliance on wholesale capital markets was indeed the root cause of the problem.
"We were over-exposed to wholesale funding," he said.
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.The bosses still in place at the helm of Britain's leading banks will appear before the Treasury Committee on Wednesday.
The BBC's chief economics correspondent Hugh Pym said committees rarely offered an easy ride and it was hard to see the banking chiefs having a comfortable time.