Huffpost Business

British Bankers: I'm Sorry For Financial Crisis

Posted: Updated:

LONDON — The former heads of Royal Bank of Scotland Group PLC and HBOS PLC apologized to shareholders and the public on Tuesday for the near collapse and subsequent government bailout of the two banks _ events that encompassed widescale job cuts and hefty financial losses.

Former RBS chairman Tom McKillop and chief executive Fred Goodwin and their HBOS counterparts Dennis Stevenson and Andy Hornby met pressure to present a penitent stance as they appeared before a Parliamentary committee to explain what went wrong at the once-proud banks.

"We are profoundly ... and unreservedly sorry at the turn of events," Stevenson told lawmakers at the start of the hearing in London.

Goodwin, who has borne the brunt of the criticism amid perceptions in Parliament and on the street that he was less prepared to accept the blame despite receiving large performance bonuses, offered a "profound apology for all the distress that has been caused."

But the four men added that it was near impossible to predict many of the events that led to the extreme tightening of short-term money markets and the sharp downturn in the global economy.

"That things could turn as quickly as they could, I don't think anyone saw," said Goodwin.

Royal Bank of Scotland _ at its peak the world's fifth biggest bank by market value _ is now majority-owned by the British government, dependent on the taxpayer for its very survival and poised to report the largest loss in British corporate history _ 28 billion pounds ($41.4 billion) for 2008.

Prime Minister Gordon Brown has called its losses "irresponsible" and blamed the firm's acquisition of the Dutch bank ABN Amro in October 2007.

RBS led a consortium which bought ABN Amro at the very peak of the market, while its investment banking business was heavily exposed to the complex financial instruments hit by the crisis.

McKillop admitted Tuesday that the purchase was a "great mistake," but added "that at the time, it didn't look like that."

The bonus culture, which many believe to have been responsible for excessive and inappropriate risk-taking, was a key topic of discussion.

Hornby stressed that he had invested all the bonuses he received in his position at HBOS into shares rather than taking a cash payment.

"I have lost considerably more money over the past two years as chief executive than I have earned," he said.

Under Hornby's watch, HBOS had to be taken over by rival Lloyds TSB to avoid collapse, even before the financial crisis became most acute in October.

The newly merged company is 43.4 percent owned by the taxpayer after the government pumped nearly 17 billion pounds into the banks under its part-nationalization scheme when shareholders shunned a multibillion pound share issue.

RBS is now 68 percent owned by the government and propped up with 20 billion of public money after the government's 37 billion pound recapitalization of the banks last October.

Outside the hearing in Parliament, bank workers carried placards reading: "Remember us? You've put our jobs at risk."

"I hope today's committee hearing is the start of a process to clear up this mess and get rid of some of the bad practices in the industry," said Glenn Miller, who works for HBOS in Edinburgh.

Wednesday's hearing is part of a long-running inquiry by the Treasury Select Committee into the causes of the banking crisis. In recent weeks it has quizzed media-shy hedge fund executives as well as key members of the financial press, including Robert Peston, the BBC's business editor.