MPs hit out at 'alarming' lack of transparency from banks

Published on Monday 18 April 2011 22:37

A TREASURY committee today slammed Royal Bank of Scotland and Lloyds Banking Group for lack of transparency despite the two banks receiving billions in government support.

Margaret Hodge MP, chair of the committee of public accounts (PAC), also hit out at a failure to meet targets for lending to small businesses last year and called for "effective mechanisms" to ensure the banks meet their lending commitments.

The PAC report was looking at the Treasury's asset protection scheme (APS), launched in January 2009 to protect RBS and Lloyds, which are 84 per cent and 43 per cent taxpayer-owned following massive state bail-outs in the financial crisis.

Hodge said the banks' lack of "appropriate and robust data" when applying for the APS was "alarming".

The PAC report comes just a day after the board of RBS faced a stormy annual shareholder meeting at its Edinburgh headquarters at Gogarburn.

Chairman Sir Philip Hampton said the bank's recovery was "clearly under way". He added that as well as posting a "much lower" loss of 1.1 billion in 2010, it had hired 46,000 staff since the onset of the banking crisis.

Commenting on the PAC findings, a spokeswoman for RBS said: "We continue to make clear and tangible progress in rebuilding RBS and remain on target to exit the APS by the end of 2012."

The bank also confirmed it had met the targets this year for both SME and mortgage lending.

Hodge said APS had helped "restore confidence and maintain financial stability" and Treasury staff should be commended.

But she added there were areas for concern and that both banks failed to meet their targets for lending to small businesses in the first year of the scheme.

"The Treasury appears to lack strong determination to use its influence to increase lending to small businesses. We expect it to find effective mechanisms to ensure the banks meet their lending commitments," Hodge said.

Elsewhere, today's report notes that RBS and Lloyds found it "difficult" to provide the Treasury with robust data on their assets.

The PAC said this was "alarming" and placed a question mark over the standards of the banks and whether or not there was effective oversight by regulators and the banks' auditors.

The gap in the information on the banks' assets "begs the question about the role played by the auditors of banks ahead of 2008", the report said.

It also claimed RBS was still vulnerable if another severe economic downturn occurred.

At yesterday's AGM, shareholders voted to pass all resolutions, including a 99.2 per cent vote in favour of the bank's remuneration report.

Chief executive Stephen Hester is in line for a controversial pay package worth up to 7.7 million.

During the meeting, it emerged that lawyers are currently examining a report by the Financial Services Authority (FSA) into RBS's troubles during the credit crisis, although the bank said it did not know when the report would be published.

"I don't have a specific date," Hampton told investors. He said RBS's lawyers were reading the report "under legal privilege".

"There's a bit of to-ing and fro-ing between the lawyers," he added.

The FSA's imminent report is likely to heavily criticise the role of RBS's previous management, including former chief executive Sir Fred Goodwin, over the bank's heavy losses during the crisis.

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