"Scumbag Millionaires," - The Sun's front page headline for Wednesday February 11th summed up the public mood towards the UK's top bankers in typically understated fashion.
As the British tabloid bluntly demonstrated, the backlash against the banking community reached pantomime-esque proportions last week as the bosses of the UK's five largest banks were hauled into a parliamentary hearing hosted by Treasury Select Committee to account for their role in the banking crisis and its impact on the economic downturn.
Bankers past and present were made to line up in Westminster over two consecutive days of grilling. On Tuesday of last week it was the turn of four former heads of RBS and HBOS who have since been ousted from their respective positions. Particular vehemence was reserved for former RBS chairman, Sir Tom Mckillop. McKillop was forced into admitting that his firm's purchase of Dutch Bank ABN Amro, at its peak share price, back in October 2007 had been a "big mistake". Meanwhile, it was alleged that back in 2002 former HBOS leaders Andy Hornby and Lord Stevenson had ignored previous warnings from the bank's former head of risk, Paul Moores, regarding the dangerous risk culture which was emerging at the firm.
The finger pointing didn't rest within the walls of The Houses of Parliament, however. The following day Sir James Crosby (who had been HBOS's chairman when Moores' warnings were reputed to have been voiced), resigned from his current position as Vice-President of the government-run Financial Services Authority (FSA).
The following day it was the turn of the UK's current bank leaders to face the music. Eric Daniels, chief executive of Lloyds Banking Group, was joined by Stephen Hester, chief executive of RBS, John Varley, chief executive of Barclays, Antonio Hor-ta-Osorio, chief executive of Abbey, and Paul Thurston, UK head of HSBC, were summoned in facing the committee.
One of the main topics on the agenda was the issue of executive bonuses. One of the measures the government hopes to introduce is to place a bonus limit of £25,000 for employees at the banks where it has a major stake holding, notably state owned Northern Rock, as well as RBS where it owns 58%, and Lloyds Banking group (43%). The initiative will form part of a wider year-long review of the current bonus system in banks which are part-owned by the government.
The bonus culture within the banking industry has come under fire from the side of the government in both Britain and the US in recent weeks. The compensation structure in place at many banks whereby top earners can hope to earn up to twice their basic salary has come to the fore as one of the reasons behind the excessive risk taking and subsequent losses which have soured the name of the banking community over the last 18 months. To illustrate the point, the UK government revealed that it would bar all five board directors at Lloyds Banking Group from receiving bonuses this year, though this didn't stop the bank from announcing that it plans to reward its lower ranked commercial and retail employees with £120 worth of bonuses this year despite recording total losses of nearly £11 billion.
The chairman of the Treasury Select Committee, John McFall, who presided over the two day hearing, implored the former leaders of RBS and HBOS to repay their bonus earnings over the last two years. In a particularly scathing attack on the individuals, McFall underlined what he saw as a moral obligation for them to pay back these excess earnings to the government: "They should reflect on the damage they have done to society. They have threatened the economy and destroyed people's lives."