Banks 'authors of own demise', claim MPs

Friday 1st May 2009

A group of influential MPs have told banks they only have themselves to blame for the collapse of the financial system.

A report by the Commons' Treasury committee published today claims the banks were the "authors of their own demise".

The MPs declare the bankers made "an astonishing mess of the financial system", but added the regulators were also to blame for the collapse of the banking system.

Chairman of the committee, John McFall, wrote in a statement accompanying the report: "Today's report looks both at the origins of the crisis and the steps the government has taken to resolve it so far.

"Whilst we would hope that the nature of banking, and bankers, would change in response to what has happened, the responsibility also falls on the regulator to create a more durable framework for finance in the future. Rewards for failure must not be repeated."

Although the committee welcomed the government's Asset Protection Scheme, MPs called for due diligence on assets in the scheme as quickly as possible and any predicted losses to be made public.

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."

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