The Treasury minister Lord Myners has been singled out for humiliating criticism in a report by MPs into the banking crisis.
In a scathing verdict, the Treasury Select Committee accused Lord Myners, a former chairman of Marks & Spencer appointed by Gordon Brown last October, of "naiveté" in his handling of the former RBS chief Sir Fred Goodwin's pension and a failure to exercise tight enough control of the issue.
They also blamed the City bonus culture for creating a "lethal combination of reckless and excessive risk", contributing to the crisis that has tipped the nation into recession.
The MPs were critical of all players in the recent dramas: the RBS board was "incompetent"; former bankers guilty of "self-pity"; the usefulness of audit firms questionable; non-executive directors part of an "incestuous... cosy club"; and the credit ratings agencies "not well equipped" to assess complex financial instruments. The Financial Services Authority (FSA) continues to show "complacency", having been "extremely slow" to act. Only the media emerges with any shred of credit.
The MPs also express concern that the now majority state-owned RBS and Lloyds groups were continuing to award bonuses and salaries that were "too high". They call for the issue to be given a higher priority by the FSA: "The failure to act meaningfully in this area would be viewed with incredulity amongst the general public and further erode trust and confidence in the banking sector."
The committee's chairman, John McFall, said: "The design of bonus schemes was not aligned with the interests of shareholders and the long-term sustainability of the banks and has proved to be fundamentally flawed. Our report outlines clear failings in the remuneration committees within the banking sector, with non-executive directors all too willing to sanction the ratcheting up of senior managers' pay, whilst setting relatively undemanding performance targets. We are also concerned that the FSA seems not be taking tackling this issue seriously enough."
Lord Myners was a key figure during the Treasury's negotiations on recapitalising the banks last October. Since then the gradual disclosure of details of Sir Fred's severance package and pension – a lump sum of £2,781,317 and about £700,000 per annum – has provoked much public anger. The Treasury Committee judged: "We suspect that Lord Myners' City background, and naiveté as to the public perception of these matters, may have led him to place too much trust in the RBS board."
The MPs add: "The apologies the committee heard from former RBS and HBOS executives had a polished and practised air. These witnesses also betrayed a degree of self-pity, portraying themselves as the unlucky victims of external circumstances."
Mr McFall commented: "The banks that have failed did so because those leading and managing them failed."
The chairman of the current inquiry into the management at the banks, Sir David Walker, is also criticised: "We are not convinced that Sir David's background and close links with the City of London make him the ideal person to take on the task of reviewing corporate governance in the banking sector."
The report proposes enhanced disclosure requirements on firms about their remuneration structures and about remuneration of highly paid staff below board level.Reuse content