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City minister Lord Myners yesterday rejected demands that banks benefiting from the government's £37bn bail-out should come under direct scrutiny from non-executive directors appointed by the Treasury.
In a speech that infuriated unions, Myners said he expected to keep the banks at arm's length and return them to private ownership "as soon as possible".
He told an audience of non-executive directors that though the collapse of the banks was partly a failure of governance, the government could adequately manage its shareholdings and act as "informed and engaged institutional investor" from the vantage point of its new shareholding agency, UK Financial Investments (UKFI).
The government recently announced it would establish UKFI to hold shares in Lloyds TSB, HBOS and Royal Bank of Scotland. Former BT chairman Sir Philip Hampton will chair the body with the Treasury's number two, John Kingman, as chief executive. It expects to appoint three more non-executives to UKFI over the next couple of months.
Myners said it was the government's intention to hold the boards to account and monitor the bank's activities. "Our guiding principle is that we will wish to return these investments to wider public ownership as soon as possible.
"These banks' boards need to be strengthened - their boards were part of the problem," Lord Myners added. "But the new non-executive directors will not be part of government, they will not report to government and they will not sit at a different part of the boardroom table."
Myners added: "We will get no more information than other institutional investors. The new directors will be appointed not by government, but taking our interest as major shareholders into account."
Unions, which have demanded that the government impose tough conditions on the banks following the financial crisis, said they were disappointed that the government appeared to be loosening the strings attached to the bail-out.
TUC general secretary Brendan Barber said the banks had forfeited the right to run themselves independently and should be closely monitored by government-appointed figures on bank boards.
"The taxpayer has pumped millions of pounds into the banks. In return the very least they can expect is a change in how banks treat their customers, an end to the bonus culture and a guarantee the banks will not go back to the bad old ways that brought this crisis in the first place.
"The cause of this crisis was that the banks were not held properly to account by their shareholders. The government cannot now abdicate its responsibilities to act as a proper and responsible part owner of those banks."
Myners was speaking at a forum for non-executive directors organised by corporate governance consultants Independent Audit.
He told an audience of about 130 FTSE 100 and FTSE 250 chairmen, chief executives and directors that the government was approaching its responsibilities as investors in a very professional way.
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