Editorial: A long way to go to fix our banking culture

The losses at HBOS were staggering, yet only one person has been held to account

The days are long gone when a British bank manager was the acme of respectability, responsibility and rectitude.

The orgy of recklessness and greed that precipitated the 2008 financial crisis put paid to that. Yet there is still something shocking about the detail which is now emerging of just how bad some bankers’ behaviour really was.

It is troubling enough that the latest report from the Parliamentary Commission on Banking Standards into the activities of HBOS – created, in 2001, by a merger of Halifax and the Bank of Scotland – puts the total cost to the taxpayer of bailing out the institution at close to £30bn. More disturbing still are the poor governance, weak risk controls and sheer incompetence by top bankers which the investigation also reveals.

The commission – chaired by the Tory MP Andrew Tyrie – has an impressive line-up, including one former Chancellor, Lord Lawson, and the newly appointed Archbishop of Canterbury, Justin Welby. The verdict is as damning as it is authoritative: when HBOS’s figures are separated from those of Lloyds (with which it was merged in the state rescue) the losses and misjudgements are staggering. And yet only one person has been held to account for the mammoth fiasco – Peter Cummings, who led the rapid expansion of corporate lending at the bank.

Mr Cummings is the only senior figure to be banned from the City by the now-defunct Financial Services Authority. No action has been taken against HBOS’s former chief executive, Sir James Crosby, however, although he conceded to the commission that he had been “incompetent” in the run-up to the crisis. The panel also found the bank’s chairman, Lord Stevenson, to be delusional, evasive and unrealistic. Yet he, too, has escaped sanction.

Such leniency is not restricted to HBOS. Over at the Royal Bank of Scotland, chief executive Fred Goodwin was stripped of his knighthood but still left the bank with a bumper pension. The bank’s Shareholders Action Group are so furious at seeing their investments slump from a high of 607p before the crash to just 25.37p this week that they are taking legal action against Mr Goodwin and 16 other former directors alleging “an incredible cover-up” in the months before the bank needed a £45bn taxpayers’ bail-out. Again, the FSA took no action against Mr Goodwin or any other of the bank’s other directors.

Meanwhile, Barclays – which had prided itself on not needing a taxpayer rescue – stands accused of fostering a culture where senior employees lost both their humility and their sense of proportion. In an attempt to restore a reputation tarnished by the Libor-fixing scandal, Barclays commissioned an independent review of its business practices. What the report shows, however, is an “entitlement culture” in which the top 70 bankers paid themselves a staggering 35 per cent more than their peers in other banks. Despite the undeniable efforts of Antony Jenkins, who took over as chief executive when the disgraced Bob Diamond resigned over Libor, there is a long way to go.

Indeed, the Salz report’s condemnatory conclusions about Barclays might be a verdict on the entire industry. Britain’s bankers have pursued their own interests at the expense of their customers and the wider economy. At the heart of the problem is a distorted corporate culture that prizes short-term profits above all else. The case for change is overwhelming. As yet, though, there is little sign that the penny has dropped. Until those responsible for the crisis are held to account, the dangerous sense of entitlement will remain unchecked.