Former RBS and HBoS chiefs apologise to Parliament

THE former heads of Royal Bank of Scotland (RBS) and HBOS apologised today for the "turn of events" that led to their banks being bailed out by the Treasury.

Lord Stevenson of Coddenham, former chairman of HBOS, told MPs that he and former chief executive Andy Hornby were "profoundly sorry".

Sir Tom McKillop, former chairman of RBS, said he would "echo" the comments and said he made a full apology in November.

Appearing before the Treasury Select Committee, Sir Fred Goodwin, previously chief executive of RBS, added: "I apologised in full and I'm happy to do so again."

Lord Stevenson said: "We are profoundly and, I think I would say, unreservedly sorry at the turn of events.

"All of us have lost a great deal of money, including of course a great number of our colleagues, and we are very sorry for that.

"There has been huge anxiety and uncertainty caused for particular of our colleagues but also, for periods of time, for our customers.

"And I would also say we are sorry at the effect it has had on the communities we serve."

Sir Tom added: "I would echo Dennis Stevenson's comments. In November last year I made a full apology, unreserved apology, both personally and on behalf of the board, and I'm very happy to repeat that this morning.

"We were particularly concerned at the serious impact on shareholders, staff, and indeed the anxiety it caused to customers, so I would very much echo Dennis Stevenson's comments."

Sir Fred said there was a "profound and unqualified apology for all of the distress that has been caused".

Mr Hornby told the committee: "We're very sorry what's happened at HBOS. It has affected shareholders, many of whom are colleagues, it's affected communities in which we live and serve, it's clearly affected taxpayers, and we are extremely for the turn of events that's brought it about."

RBS is now 68% owned by the State and has been propped up with 20 billion of public money.

HBOS has been entirely swallowed by Lloyds TSB in the newly-formed Lloyds Banking Group after the lender fell victim to the financial crisis.

RBS, HBOS and merger partner Lloyds were supported with 37 million in taxpayers' cash last autumn as the financial system came close to collapse.

Update: 1045hrs Sir Fred denied RBS had ignored warnings from the Bank of England and the Financial Services Authority, insisting that nobody had anticipated the scale of the crisis.

"I've gone over this time and time and time and time again in my mind as to what was the point at which we should have seen this differently," he said.

"And I come back to that, at the time, there was a view – not that things would continue forever – there was a definite mood that the economy in this country and generally was going to slow down, that the financial markets were going to slow down, but at no point did anyone get the scale or the speed of this, and that was what was so damaging about this slowdown.

"It wasn't that our business was premised on everything continuing to go upwards forever.

"But that things could turn as quickly as they did, I don't think anyone saw, and I don't think, in fairness to the Bank of England, that they really saw it was going to turn this quickly.

"I think everyone saw it was going to come at some point but for it to turn in the way it has and so profoundly and globally is the part that has caught everyone out. It was not possible at the time to envisage."

Update: 12.08 Mr Hornby called for changes in the bonus system for bankers.

"There is no doubt that the bonus system in many banks around the world has proven to be wrong in the last 24 months," he told MPs.

"In that, if people are rewarded for purely short-term cash form and are paid very substantial short-term cash bonuses without it being clear whether these decisions over the next three to five years have proven to be correct, that is not rewarding the right type of behaviour."

Mr Hornby said bonuses should be tied to the performance of an institution's shares over a period of years.

He had received no bonus for 2008, he said, and had invested all of his bonuses as both chief executive and, previously, as a board member, in HBOS shares.

"In the two years that I have been chief executive, I have lost simply more money in my shares than I have been paid," he added.

Sir Fred said he had also invested his last bonus in his company's shares. He received no bonus for 2008 but was paid 1.46 million in salary, he told the committee.