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

Arts and Entertainment
tvGame of Thrones season 5 ep 4, review - WARNING: contains major spoiliers!
Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
Tiger Woods and Lindsey Vonn are breaking up after nearly three years together
peopleFormer couple announce separation in posts on their websites
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Arts and Entertainment
Haunted looks: Matthew Macfadyen and Timothy Spall star in ‘The Enfield Haunting’
tvThe Enfield Haunting, TV review
The Mattehorn stands reflected in Leisee lake near Sunnegga station on June 30, 2013 near Zermatt, Switzerland
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Recruitment Genius: Online Customer Service Administrator

    £16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

    Recruitment Genius: Digital Marketing Executive

    £18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

    Day In a Page

    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

    Everyone is talking about The Trews

    Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living