Speaking at a Treasury Select Committee hearing today Labour MP for Leeds East George Mudie said there was a “cosy consensus” among the Bank of England and the banking sector to put full blame on the FSA.
He said to British Bankers’ Association chief executive Angela Knight: “You are content with heaping this onto the FSA. The credit crunch is beyond Northern Rock and it wasn’t the FSA that caused this it was dodgy securities so for some considerable time people in your industry were very rich and now we’re all feeling the pain. The only one of the Bank of England, the banking industry and the FSA to come before us with their hands in the air was the FSA. It has allowed your industry and the Bank to get away without answering any hard questions.”
Alchemy managing partner Jon Moulton also defended the regulator claiming it was “unrealistic to imagine the FSA could ever handle the complexities of some of these models and markets” given bank chief executives do not even understand them.
He called on MPs to bring “trustworthiness” back into the banking sector by only allowing banks to sell products they, and the regulator understand. When asked by chairman John McFall whether the regulator should only regulate products it understands Knight said “yes”.
TSC members and Moulton slammed the bonus culture in the City, claiming the “perverse” incentives fueled “bad behaviour” among bankers.
Moulton suggested bank be forced to include remumeration structures when being assessed for risk.
He said: “The way people are paid should be part of the way they are assessed for risk. salaries can be high but it’s the incentive payments that really do the damage.”