Julian Knight: The banks were never going to listen to Cassandra

Paul Moore, like the ancient Cassandra, was always doomed to be ignored. HBOS was caught in the same mad mindset as almost every other major corporate player in banking and beyond.

For the big investors, profit growth of 5 or 10 per cent a year is nowhere; it must be 20 or 30. So if Mr Moore's warnings on risk management at HBOS had been heeded, what would have happened? The institutional investors – perhaps prompted by the then "success" of Northern Rock – would have soon agitated against it or a takeover (funded by easily available debt) would have been launched.

At the same time as Mr Moore was penning his warning, Nationwide building society, a mutual, had made its own assessment of the credit bubble and was gently moving out of the massively overheated buy-to-let sector – the market that eventually did for Bradford & Bingley. Nationwide will wish it had acted quicker than it did, but still the episode highlights a crucial difference between the mutual and shareholder models.

The truth is that the failures of the banks is all about the way in which nearly all big western companies are run: non-executive directors who spread themselves too thinly between boards, which are in turn nothing more than gentlemen's back-scratching clubs; and a City of London dangerously short-term in outlook, populated by people whose raison d'être is the highly leveraged corporate takeover and screw everything else.



Open warfare at the FSA

Off the back of the resignation of Moore's old boss, Sir James Crosby, as deputy chairman of the Financial Services Authority, warfare is breaking out in the corridors of the City regulator. Adam Phillips, acting chairman of the Financial Services consumer panel, which was set up to advise the FSA board on how to improve the treatment of bank and insurance customers, issued a press release on Thursday calling for changes at the top of the regulator. Mr Phillips said the FSA needs people who "identify with the consumers that regulation is there to protect" – ergo fewer bankers. I couldn't agree more.

A quick scan of the FSA top brass reveals a heavy bias to the "masters of the universe". In the wake of the Northern Rock affair, and fearing that the regulator didn't have the skills to monitor bank balance sheets adequately, the FSA chief, Lord Turner, promised an upping of these skill levels – hence more bankers. But the world has moved on since then and anger is mounting by the day. A radical overhaul and new appointments at the top of the regulator are musts.

We don't want unqualified people or, heaven forbid, hacks running things, of course, but we do need a few seats at the top table for those who work with and advise consumers – who see first-hand the damage that has been wrought by the greedy banks.

The FSA prides itself on "light touch" regulation, and this suited the bankers inside and outside the regulator during the splurge of the recent past. They hid behind the FSA's constitution that states it should promote financial services and the City. However, the credit crunch is not an aberration before the restoration of business as usual; it represents a fundamental regulatory and systemic failure. And although I am an old-school techno-clot, I do know that when you get one of them, it's time to reboot.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

PROMOTED VIDEO
Life and Style
Suited and booted in the Lanvin show at the Paris menswear collections
fashionParis Fashion Week
News
i100
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
News
An asteroid is set to pass so close to Earth it will be visible with binoculars
news
News
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Tax Assistant

    Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

    Recruitment Genius: Outbound Sales Executive - OTE £25,000

    £16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

    £45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

    Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

    £35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Day In a Page

    Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

    Celebrities call on David Cameron to take more Syrian refugees

    One young mother tells of torture by Assad regime
    The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

    The enemy within

    People who hear voices in their heads are being encouraged to talk back
    'In Auschwitz you got used to anything'

    'In Auschwitz you got used to anything'

    Survivors of the Nazi concentration camp remember its horror, 70 years on
    Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

    Autumn/winter menswear 2015

    The uniforms that make up modern life come to the fore
    'I'm gay, and plan to fight military homophobia'

    'I'm gay, and plan to fight military homophobia'

    Army general planning to come out
    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
    America: Land of the free, home of the political dynasty

    America: Land of the free, home of the political dynasty

    These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
    A graphic history of US civil rights – in comic book form

    A graphic history of US civil rights – in comic book form

    A veteran of the Fifties campaigns is inspiring a new generation of activists
    Winston Churchill: the enigma of a British hero

    Winston Churchill: the enigma of a British hero

    A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
    Growing mussels: Precious freshwater shellfish are thriving in a unique green project

    Growing mussels

    Precious freshwater shellfish are thriving in a unique green project