Kofi Annan: 'Greed' caused crisis

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Former UN secretary general Kofi Annan has said the banking crisis was partly caused by greed and the industry's "distorted" incentive system.

He told BBC Scotland he could understand why people were angry, scared and felt betrayed.

Mr Annan said people had to be held to account, but warned against creating a "witch-hunt" atmosphere.

He argued governments now needed to move forward as part of a strong framework of international regulation.

Mr Annan, who was in Scotland to deliver a lecture at Adam Smith College in Kirkcaldy, Fife, said it would be difficult to get bankers to hand back money that had been paid out to them.

In the UK alone, billions of pounds have been spent saving banks and building societies including the Royal Bank of Scotland and HBoS.

When you go and tell somebody that the company is bankrupt, we are closing our doors, we don't have money, but so-and-so is going out the door with millions - it's a provocation Kofi Annan

Prime Minister Gordon Brown threatened legal action against ex-RBS chief Sir Fred Goodwin over his "unacceptable" £16m pension.

Commenting on the banking crisis, Mr Annan told BBC Scotland's Politics Show: "Greed was part of it. Lack of effective regulation and supervision.

"There were those who believed that the bankers and the banks, out of their own self interest, will self-regulate."

Governments and political leaders, Mr Annan said, needed to respond in a way which convinced people their problems were equally as important.

He added: "I can understand why people are angry. I can understand why there is fear. I can understand why they feel betrayed.

"And of course, for the average person who, when he's losing his home, can't pay his mortgage, nobody can help - the government can't help, the bank can't help.

"When they don't have the means to pay medical bills - nobody can help because the government doesn't have the budget.

"And suddenly, the same governments find billions and trillions to help the bankers."

'Self-serving'

Those who had committed a crime should be held accountable, said Mr Annan.

But he warned: "We need to be careful not to create an atmosphere of a witch-hunt."

He said: "Some of it was greed. It was self-serving decision-making and the incentive systems were so distorted.

"When you go and tell somebody the company is bankrupt, we are closing our doors, we don't have money, but so-and-so is going out the door with millions - it's a provocation."

Mr Annan, whose gave a lecture in Fife on Africa And The Global Economic Crisis, went on to warn governments they needed to fulfil commitments made during the G8 Summit in Gleneagles in 2005, suggesting issues such as climate change and food shortages should not be put on the back-burner.

"I hope governments will not use the crisis as an excuse not to live up to those promises because its even more urgent now," he said.