It is interesting now to see the Financial Services Authority (FSA) identify the weaknesses in its structure but little is being said about how the then Labour Government, its Chancellor, Gordon Brown, and later his successor Alistair Darling "danced around their handbags" whilst the entire financial edifice they created came crashing down ("Sir Fred was on radar as early as 2003", The Herald, December 13).
Back in 1997, having given the Bank of England operational independence in monetary policy (responsible, through its Monetary Policy Committee, for interest rates), Gordon Brown then proceeded, under the Bank of England Act of 1998, to strip the bank of any formal powers to intervene to save the banks and failed to define what its role would be in the event of any crisis. These actions almost precipitated the resignation of Eddie George, its then Governor, and this general level of animosity or resentment would have been apparent during the subsequent events.
What was put in place, under a Memorandum of Understanding, was a committee known in Whitehall as T3 and comprising the Treasury, Bank of England (BoE), and the FSA. This committee was charged with the responsibility of increasing financial stability but Gordon Brown did not attend any of its meetings and Alistair Darling, who steered the enabling legislation through Parliament, attended only one committee meeting.
According to Andrew Rawnsley in his book The End of the Party, the principals in this tripartite system, namely the Chancellor, the Governor of the BoE and the head of the FSA never met and the monthly meetings of the standing committee were being attended by deputies.
To test the robustness of the new system, the Treasury undertook a "war game" and this raised "serious questions about the structure created by Brown"and, although there was little in the way of communication between the Treasury and the FSA, the latter "did flag as many as 30 warnings about individual banks". The BoE conducted only one war game (2004/5) with one participant commenting "no-one acted on any of the suggestions that came out of it" and another war game, undertaken by the FSA in late 2006, "concluded that the deposit guarantee scheme was not adequate to prevent bank runs, a gaping deficiency which would be a critical element of the crisis that broke nine months later".
These extracts show that the system was tested, found to be flawed and, prior to its collapse, nothing was done. Whilst it is laudable for the FSA to recognise its weaknesses and failings, there is a deafening silence from Gordon Brown.
10 Beauchamp Road,
Time and time again we are informed that it is necessary to pay extravagant salaries and outrageous bonuses to senior bankers in order to ensure that we get the best people at the top.
It has now been revealed by the FSA that a major cause of the collapse of the Royal Bank of Scotland in 2008 was "poor management".
If that is the result of paying people like Sir Fred Goodwin annual sums that many working-class people don't manage to accumulate in a lifetime, perhaps that old chestnut needs to be consigned to the fire of history – and even the so-called top people paid according to results obtained, rather than those expected.
This becomes especially relevant in light of reports of Sir Fred's relationship with the board of RBS, taking account of the FSA not always having regarded the dialogue with RBS's executive management as constructive.
Rev C Brian Ross,
253 Shields Road,
THE Herald gives us an interesting picture of the world we are living in. On Page 4 (December 13) we read that the country "cannot take enforcement action" against the RBS directors whose "challenging management culture" bankrupted the country, or against the members of the authority who were paid to oversee them but were "not as tenacious as they should have been". On Page 2 we see a sheriff sentencing boys aged 16 and 18 to three years' detention each for "the crime committed by each accused", amounting to silly entries on Facebook which had no effect on anybody.
It really does seem that it is who you are, not what you do, that matters in this country.
18 Bonar Crescent, Bridge of Weir.
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