In its third report on the banking crisis published this week, the Treasury select committee challenges the FSA over whether it was taking the issue of remuneration seriously enough. It said: “We express concerns that the Turner review downplays the role that remuneration played in causing the banking crisis and question whether the Financial Services Authority has attached sufficient priority to tackling remuneration in the City.”
Select committee chairman John McFall says: “Bonus-driven remuneration structures led to a lethal combination of reckless and excessive risk-taking.”
The report considers Lord Myners was na in his handling of RBS chief executive officer Sir Fred Goodwin’s dismissal and remuneration arrangements.
It says: “We conclude that Lord Myners’ assertion that his precept to the RBS board – that there should be no reward for failure – did not represent an adequate oversight of the remuneration of outgoing senior bank staff. It would have been far better if Lord Myners had given a stronger, clearer direction of Government requirements for a bank in receipt of public funds and had assured himself by demanding to be kept informed of the detailed negotiations that were taking place.”
The select committee says it is “deeply concerned” by credit rating agencies’ conflicts of interests and says it has seen little evidence of the problem being tackled with any sense of urgency.
The report questions whether Sir David Walker’s close links with the City mean he is the right person to conduct the review of corporate governance under way in the banking sector.
It proposes restrictions on the number of non-executive directorships an individual can hold and recommends the FSA consults on ways to improve transparency of financial reporting.