MPs Slam Bankers For 'Astonishing Financial Mess'

Britain's top bankers have been accused of making an "astonishing mess" of the financial system, in the latest report from MPs.

In the Treasury Select Committee's second report on the financial crisis, the committee said it had been caused by the banks' own reckless behaviour. In a damning 121-page report it added there was an "unresolved inconsistency" between the assurances of bank bosses and complaints on the ground from businesses who are struggling due to lack of lending.

"Bankers have made an astonishing mess of the financial system," committee chairman John McFall said.

He went on to attack the inability of the financial institutions to govern themselves affectively and manage risks, with inadequate scrutiny for non-executive directors.

He said: "Governments, politicians, regulators and central bankers in the UK and across the world also share a responsibility for sustaining the illusion that banking from retail deposit-taking was also worthy of 'further debate'."

The banks current lending policies were also criticised by the MPs, during several sessions held outside London. They were told that - contrary to claims being made by the banks - many small businesses were finding it hard to obtain loans, except with higher charges and fees.

"The committee deplores the behaviour of a number of those banks who have received so much public money and behaved in such an insensitive manner, particularly to established customers," said Mr McFall.

"There is clearly an unresolved inconsistency between, on the one hand, bankers' assurances that they are increasing their lending and, on the other hand, widespread and clearly sincere complaints that credit is difficult to obtain and increasingly expensive," he said.

The committee also criticised banks that have received public money yet have made sharp increases in bank charges and arrangement fees for small firms, "which can often be more damaging to businesses than higher interest rates".

In addition, rebuilding consumer trust could be achieved by strengthening the regulatory regime for all types of bank, the report said.

Mr McFall added: "Looking to the future, the rebuilding of consumer trust is key. We are undertaking a new inquiry into the consumer-related issues that have emerged, which will include looking at where regulation can be strengthened to reassure depositors.

"There will come a time when saving will need to be encouraged; people will need to know their hard-earned money is safe."

(JM/BMcc)