Banks have not learnt lessons of 2008 crisis, says Gordon Brown Former PM claims bankers still ‘rewarded for failure’ in scathing attack on sector Gordon Brown.
Former prime minister Gordon Brown has launched a scathing attack on the British banking system, arguing in a new book that the sector has failed to learn many of the lessons from the 2008 financial crisis. “Little has changed since the promise in 2009 that we bring finance to heel,” Mr Brown wrote in an extract from his book entitled My Life, Our Times.
“The banks that were deemed ‘too big to fail’ are now even bigger.” Mr Brown, whose Labour government oversaw a record bailout of the banking system, complained that bankers were still
He said that instead of being thrown in jail for dishonest conduct, bankers were paid too much and could fall back on state support if things went wrong. Mr Brown added that in the next crisis regulators “would still not know what is owed and by whom and to whom” because of the way assets have shifted out of banks into the more lightly regulated “shadow banking” system.
He said that “2009 has proved to be the turning point at which history has failed to turn”. If bankers’ conduct was dishonest by the ordinary standards of what is reasonable and honest, should there not have been prosecutions in the UK as we have seen in Ireland, Iceland, Spain and Portugal? “Dividends and bankers’ pay today represent almost exactly the same share of banks’ revenues as before the crisis hit,” wrote Mr Brown, pointing out that the number of UK-based bankers earning more than €1m has risen 50 per cent to over 4,000 since the crisis.
“If bankers’ conduct was dishonest by the ordinary standards of what is reasonable and honest, should there not have been prosecutions in the UK as we have seen in Ireland, Iceland, Spain and Portugal?” he wrote in his book, which is due to be published on November 7. Britain has introduced a new criminal charge of reckless misconduct in the management of a financial institution. But Mr Brown said a “more relevant” tool to crack down on bankers who carry out fraud, fail to disclose information or abuse their position would be the 2006 fraud
He did not acknowledge that several bankers are in prison after being convicted over the past two years of rigging the Libor interest rate benchmark. Former HBOS banker Lynden Scourfield was jailed in February along with several associates for defrauding small business clients of the bank.
Mr Brown also criticised Barclays for the way it raised billions of pounds from Qatar and Abu Dhabi sovereign wealth funds, which this year led the Serious Fraud Office to charge the bank and several of its former executives.
“I was always unhappy that Barclays chose to use their deal to make a political statement: denouncing our recapitalisation of the banks,” he wrote. Describing Barclays’ strategy during the crisis as “unconscionable”, Mr Brown said that as well as making failed bids for both ABN Amro and Lehman Brothers, it even sought to acquire its larger rival Royal Bank of Scotland in October 2008.
Two people who worked closely with Barclays in 2008 played down the seriousness of its interest in acquiring RBS, saying it was one of several combinations considered at a time when the banking system was in crisis. In the end, Barclays acquired Lehman’s US operations after its US rival collapsed.
However, his criticism was mostly directed at Fred Goodwin, the disgraced former chief executive of RBS, who was stripped of his knighthood after being fired in the wake of a £45bn bailout of RBS by the government in 2009. Recommended Gordon Brown calls for ‘third way’ to stave off Scottish referendum UK tax authorities warn banks against aggressive avoidance RBS takes a step toward full health but road ahead is long
“By the time the bank collapsed he had from his company a private suite in the Savoy costing £700,000 a year, a fleet of 12 chauffeur-driven Mercedes limousines with RBS emblazoned all over them, and he regularly used a private jet at the weekend — whether for boar hunting in Spain or following the glamorous F1 circuit around the world.” He recalled how Mr Goodwin was the only banker to oppose a plan to fund community causes using as much as £1bn of “orphan assets” left in banks by customers who disappeared or died without leaving any instruction for their money.
Mr Brown, prime minister from 2007 to 2010, stepped down as an MP in the 2015 election and is now the United Nations special envoy for global education. He was widely credited with achieving consensus between G20 countries for harmonised financial regulation after the 2008 crisis. “But I wanted to go further and create a global banking constitution that would set standards across the system,” wrote Mr Brown. “In the end, delivering these proposals meant overcoming more obstacles than I had time left in government to surmount.”