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Banks caused their own demise say MPs

Banks have been the principal authors of their own demise according to a damning report from the Treasury select committee released today.

The report entitled Banking Crisis: dealing with the failure of the UK banks is the TSC’s second report into the banking crisis and finds that bankers have made an “astonishing mess” of the financial system.

But the British Banker’s Association attacked the report saying it has sought headlines and will not move forward the discussion on the future of banking.

TSC chairman John McFall said: “The banks have failed to govern themselves effectively: senior managers failed to understand the investments being made in their name; risk management and due diligence were seeminly ignored; and the non-executive directors, often eminent and hugely experienced individuals, failed in the proper scrutiny of the banks’ activities.”

The Report says Governments, politicians, regulators and central bankers in the UK across the world also played a part in the economic crisis and the TSC says the FSA must create a more durable framework for finance regulation.

It questions whether the FSA should have undertaken more and earlier analysis to clarify the nature and value of assets upon which banks were relying.

It also calls for UKFI to be established on a proper statutory basis.

McFall says: “It is not in the national interest for UKFI to remain so enigmatic a body. Given the importance of the task entrusted to it and the vast sums of public money involved, we need reassuring, not only of its independence, but also that there are adequate mechanisms in place to make it properly accountable to Parliament and the public.”

BBA chief executive Angela Knight says: “If we simply continue to blame the industry for all of the problems of the economy in the UK it will do little to help us out of the recession and will further damage the UK as an international financial centre.”


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