Much-Reviled Banking Sector Bailed out to the Tune of Pounds 117bn; Public Fury as Big Bonuses Refuse to Die

Daily Post (Liverpool, England), December 31, 2009 | Go to article overview

Much-Reviled Banking Sector Bailed out to the Tune of Pounds 117bn; Public Fury as Big Bonuses Refuse to Die


Byline: RUSSELL LYNCH

BRITISH banks retained their status as public enemy number one in 2009 after a year beginning with bail-outs and grovelling apologies - and ending with a pounds 550m tax on bonuses.

The industry came under constant fire while familiesS and firms faced rising dole queues and the impact of the country's longest ever recession - made worse in many eyes by the excesses of the once-feted financial sector.

The National Audit Office put the public tab for propping up the banks at pounds 117bn, with the taxpayer's overall exposure through various guarantee schemes an even more staggering pounds 850bn.

As the man in the street struggled with the mind-boggling sums, the loathing was pinned on hate figures such as former Royal Bank of Scotland boss Sir Fred Goodwin - the villain of the piece forced into hiding when details of his pounds 700,000-a-year taxpayerfunded pension emerged. Sir Fred, who was called up with fellow former bosses of RBS and the former HBOS in a virtual show-trial before MPs in February, eventually agreed to reduce his generous terms but has yet to re-enter public life.

Only former HBOS chief executive Andy Hornby - another ashen-faced confessor before the Treasury committee - managed to revive his career following the debacle, taking the helm at high street health and beauty giant Alliance Boots.

City minister Lord Myners said in December that the reputation of the industry had been tarnished "seemingly beyond repair", although amazingly many of the banks managed to make a bad situation worse with a clutch of PR disasters throughout the year.

Royal Bank of Scotland - set to be 84% taxpayer-owned after a deal to insure some pounds 280bn in bad debts - posted a UK corporate record loss of pounds 24.1bn in 2008.

But it still found itself embarrassed after details of a Wimbledon jolly emerged, and was then embroiled in a row with the Government over plans to pay out pounds 1.5bn in bonuses - 50% ahead of the previous year.

Reported threats for the bank's new board to resign en masse if the Treasury used its veto on the bonus pool - although denied later by the bank - were greeted with disbelief by a public wondering if there was any new low to which the sector could sink.

This view was hardened further when it emerged the taxpayer had shelled out more than pounds 61bn in secret emergency loans to RBS and HBOS at the height of the crisis, although the money was later paid back.

Despite comments from Barclays Capital president Bob Diamond that bankers "get it", there was growing disquiet from ministers, as well as Bank of England governor Mervyn King, over the sluggish pace of change.

Appropriating wartime leader Winston Churchill in an October speech, the Governor pointedly said: "Never in the field of financial endeavour has so much money been owed by so few to so many. And, one might add, so far with little real reform."

The bonus issue was eventually tackled head on by the Chancellor in his Pre-Budget Report as the politically toxic prospect of a round of major payouts loomed early next year due to turbo-charged investment banking profits from the UK's major players - weeks before a likely General Election. …

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