Last Thursday I drifted over to BBC Radio Scotland’s Morning Call and the presenter, Kay Adams, was on top form with the day’s talking point – the imminent report by regulators, conducted by independent barrister Andrew Green, into the collapse of Halifax Bank of Scotland (HBOS) which was being issued later that morning.
The particular angle taken by Kay was the way those responsible had managed to avoid financial penalties and criminal charges.
The programme, as is typical of most talk-in shows, often strayed from the main premise but this turned out to be a revelation as shareholders called or e-mailed with horrendous, and sometimes heart-rending, personal stories. Most of them were not ‘rich’ in the literal sense, many being former bank employees. Although not always particularly well paid, they had chosen to take their annual bonuses in shares to build up a nest egg for retirement, all or most of which evaporated when the share price collapsed.
As for what listeners felt should be done to bring about retribution for those responsible?
Well, in terms of penalties there seemed to be a resigned acceptance that the horse had already bolted, which of course only made the victim’s anger and frustration even worse.
When the report came out shortly afterwards nothing so drastic as even a fine was suggested – the statute of limitations means even that option has gone. Ten former HBOS executives and senior managers could face investigations but these would probably take two years to complete, with the most onerous sanction being barred from working in financial services – hardly something to worry about when you’ve been allowed to retain the enormous salaries and bonuses ‘earned’ during the so-called boom years.
The report also criticises the Financial Services Authority for light touch regulation but says nothing about any consequences for those who sat making paper aeroplanes while the sector they were supposed to be monitoring crashed and burned around their ears.
Decisions made by the main ‘HBOS three’ (Lord Stevenson, James Crosby and Andy Hornby) plus, of course, Fred Goodwin and his lieutenants at RBS, have not only financially ruined thousands of households but perhaps done even worse damage: who can say that the stress brought on by losing life savings has not led to premature deaths?
Had these four burgled the homes of several shareholders’ homes and stolen jewellery and other valuables then I am sure the aftermath, through traumatic, would not have been nearly as long-lasting, nor as consequential, for the victims as the collapse in value of their shareholdings. Yet in this scenario the perpetrators would almost certainly have gone to jail.
So if anything is to be salvaged from this and “lessons learned”, it would seem sensible to tighten up the limited liability regulations within company law, to include the possibility of prison sentences as a means of deterring activity that might have seriously adverse consequences for ordinary investors. True, this could be viewed as a disincentive to business start-ups and expansion of existing businesses but surely HBOS and RBS prove the need for change.
It also seems appropriate to ensure that ‘regulators’ – whether non-executive directors from the private sector or salaried civil servants – are held to account when they fall down on the job.
It is noticeable that since 2009, left-wingers have been able to blame “the bankers” (by which they really mean the entire capitalist system) for all the ills that have beset the economy when the bigger problem is an overweening, unaffordable and unsustainable public sector. In fact the banking practices referred to are not capitalist but anti-capitalist, although try telling that to a suburban shareholder who has lost his shirt.
A second crisis on the scale of HBOS/RBS could lead to rioting in the streets and, perhaps, the emergence of an undemocratic government. So the case for tougher penalties is about more than just aggrieved shareholders getting even.