Speaking at a Treasury select committee hearing this week, Labour MP for Leeds East George Mudie said that there was a “cosy consensus” among the big banks to put the full blame on the FSA.
After hearing evidence from British Bankers’ Association chief executive Angela Knight, Mudie said: “You are content with heaping this on to the FSA. The credit crunch is beyond Northern Rock and it was not the FSA that caused it, it was dodgy securities and for some considerable time people in your industry were very rich and now we are all feeling the pain.
“The only one to come before us with their hands in the air was the FSA and this has allowed your industry and the Bank of England to get away without answering any hard questions.”
Mudie criticised the Bank of England for not making it a condition of its £50bn liquidity package that banks should endeavour to keep borrowers in their homes.
Committee chairman John McFall said: “The public sees this as a one-way street. There is going to be a backlash if there is not a real concerted response from the industry. If repossessions really go up and we do not see any alternative proposals from the banks, it is going to cause a legal storm.”
Jon Moulton, managing partner of private equity firm Alchemy, told members of the select committee that it was “unrealistic to imagine the FSA could ever handle the complexities of some of these models and markets”, given that bank chiefs did not even understand them.
MPs and Moulton criticised the bonus culture in the City of London, claiming that it encouraged bankers to overlook issues of required due diligence.
Moulton called on the regulator to take remun- eration structures into account when assessing the risk rating of a bank.