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Four of the country's former leading bank chiefs were accused of displaying "a hint of arrogance" today following an appearance before MPs that saw them apologise unreservedly for their role in the events leading up to the financial crisis.
Sir Fred Goodwin and Sir Tom McKillop, respectively the former chief executive and chairman of RBS, and Andy Hornby and Lord Stevenson, respectively the former chief executive and chairman of HBOS, apologised to the Treasury select committee for failing to prevent the circumstances that led their banks being taken largely into public ownership.
During the hearing, which lasted more than two hours, the bankers also backed calls for an overhaul of the City's bonus culture. McKillop and Goodwin also admitted that RBS has made a mistake when it went ahead with the purchase of the Dutch bank ABN Amro.
But, after the hearing was over, the committee's chairman, John McFall, told the BBC's World at One that he was not entirely convinced by their contrition.
"Was there a hint of arrogance still there? Absolutely," McFall said.
The four former bank chiefs made their comments at the opening of a hearing that saw them accused by MPs of living in denial, destroying great British institutions and – in one case – of having a "different moral compass" from other people.
During the session, the former executives insisted that they were not alone in failing to anticipate the scale of the global financial crisis that led to their banks having to be rescued by the taxpayers. But they did offer cautious support for an overhaul of the City bonus culture.
At the start of the session Goodwin, who in the past has been criticised for not showing sufficient regret for his role in what happened to RBS, said he was offering "profound and unqualified apologies for all the distress that has been caused". He said that he was repeating an apology he had already given to shareholders.
Stevenson said: "We are profoundly and, I think I would say, unreservedly sorry at the turn of events.
"All of us have lost a great deal of money, including of course a great number of our colleagues, and we are very sorry for that.
"There has been huge anxiety and uncertainty caused for particular of our colleagues but also, for periods of time, for our customers.
"And I would also say we are sorry at the effect it has had on the communities we serve."
McKillop added: "I would echo Dennis Stevenson's comments. In November last year I made a full apology, unreserved apology, both personally and on behalf of the board, and I'm very happy to repeat that this morning.
"We were particularly concerned at the serious impact on shareholders, staff, and indeed the anxiety it caused to customers, so I would very much echo Dennis Stevenson's comments."
Hornby told the committee: "We're very sorry what's happened at HBOS. It has affected shareholders, many of whom are colleagues, it's affected communities in which we live and serve, it's clearly affected taxpayers, and we are extremely sorry for the turn of events that's brought it about."
RBS is now 68% owned by the state and has been propped up with £20bn worth of public money.
HBOS has been entirely swallowed by Lloyds TSB in the newly formed Lloyds Banking Group after the lender fell victim to the financial crisis.
RBS, HBOS and merger partner Lloyds were supported with £37m in taxpayers' cash last autumn as the financial system came close to collapse.
The bankers also agreed that the City's bonus system needed to be reviewed.
McKillop said: "I believe that the events that have occurred and the situation we are now in should give us an opportunity to look fundamentally at the remuneration practices going forward. But I do believe that it needs to happen across the board."
Goodwin said that the bonus system was "something that should be looked at", but he said he did not accept that the bonus culture had encouraged illegitimate risk-taking at RBS.
"There were not any rogue elements," he said. Bankers were making deals that were authorised and "the risks were recognised". But the problem was that the risks were wrongly calibrated.
Goodwin said he had also invested his last bonus in his company's shares. He received no bonus for 2008 but was paid a £1.46m salary, he told the committee.
Hornby said he thought bonuses should be tied to long-term performance, and that instead of being paid annually, they should be paid over three to five years.
"There is no doubt that the bonus system in many banks around the world has proven to be wrong in the last 24 months," Hornby told MPs, "in that, if people are rewarded [in] purely short-term cash form and are paid very substantial short-term cash bonuses without it being clear whether these decisions over the next three to five years have proven to be correct, that is not rewarding the right type of behaviour."
He had received no bonus for 2008, he said, and had invested all of his bonuses as both chief executive and, previously, as a board member, in HBOS shares.
"In the two years that I have been chief executive, I have lost simply more money in my shares than I have been paid," Hornby added.
Asked whether short-term bonuses ought to be clawed back, Stevenson said he would rather not be drawn on that question.
Goodwin and McKillop were also asked about RBS's decision to buy the Dutch bank ABN Amro, which led to RBS having to write off £20bn. Michael Fallon, a Tory member of the committee, told McKillop: "You have destroyed a great British bank. You have cost the taxpayer £20bn."
McKillop said: "The deal was a bad mistake. At the time it did not look like that ... There was widespread support for it."
More than 90% of shareholders supported the deal and it was also agreed by the regulators, he went on.
McFall asked Goodwin if he accepted that it was "hubris" on Goodwin's part that had caused RBS to go ahead with the ABN Amro purchase.
Goodwin replied: "I have read those comments too, but it's not true. At the time it did not look like a mistake."
McFall also suggested to Goodwin that he had fallen "hook, line and sinker" for the claims that ABN Amro was making about the strength of its position.
The bankers came under a particularly fierce grilling from John Mann, a Labour member of the committee.
Addressing Goodwin, Mann asked him whether he had a "different moral compass" from other people. He also asked him if his integrity and ethics were representative of the banking profession as a whole.
Goodwin replied: "Reflecting on everything that has happened, I think there is a case for questioning some of the [decisions] that I have made. I'm not aware of any basis for questioning my integrity as a result of it all."
He went on: "I could not be more sorry for what has happened. I have invested a lot in RBS. It's a great distress to me to see particularly what my colleagues are going through."
Referring to HBOS, Mann said that he had had letters from HBOS employees saying they were "ashamed" to work for the bank. He asked Hornby to confirm that he was now working for Lloyds TSB, the bank that subsequently took over HBOS, as a consultant on a salary of £60,000 a month.
Mann said Hornby's salary would pay the wages of 36 low-paid bank staff. "Why is failure being rewarded? Why are you still getting this money?" he asked.
Hornby said he was being paid £60,000 a month, but that he had said that he only wanted the arrangement to continue for three months and that, if they still wanted him after that, he would work for free.
Hornby went on: "Can I please reiterate in terms of your impression about being rewarded for failure that I invested every single penny of my bonus in shares? I have lost considerably more money since I have been chief executive than I have earned."
Asked whether he felt personally responsible for what happened to RBS, Hornby said he was not "personally culpable".
McFall picked up on this and asked Hornby why he had apologised if he was not personally culpable. He also referred to reports saying that bankers had been coached before their appearance at the committee and asked if he was just apologising because he had been advised to.
Hornby replied by saying that he had been asked a question about "personal" culpability. He went on: "We all take responsibility. I fully accept my own role within all of that."
George Mudie, a Labour member of the committee, told the four that, having listened to them, he had the impression that they were "all in bloody denial" about their role in what went wrong.
Stevenson denied that. "We are not in denial," he told Mudie.
"There are many things that we regret. I do think that in a number of areas it's a fact that very carefully arranged risk management systems were developed ... which regrettably did not spot scenarios coming up that have come up. Stress-testing did not stress-test adequately."
During the hearing, Goodwin insisted that nobody in the financial services industry had anticipated a crisis of the kind that occurred.
"I've gone over this time and time and time and time again in my mind as to what was the point at which we should have seen this differently," Goodwin said.
"And I come back to that, at the time, there was a view – not that things would continue forever – there was a definite mood that the economy in this country and generally was going to slow down, that the financial markets were going to slow down, but at no point did anyone get the scale or the speed of this, and that was what was so damaging about this slowdown.
"It wasn't that our business was premised on everything continuing to go upwards forever.
"But that things could turn as quickly as they did, I don't think anyone saw, and I don't think, in fairness to the Bank of England, that they really saw it was going to turn this quickly.
"I think everyone saw it was going to come at some point but for it to turn in the way it has and so profoundly and globally is the part that has caught everyone out. It was not possible at the time to envisage."
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