Brian Wilson: Holyrood must probe bank collapse

AFTER an FSA whitewash, MSPs have a duty to investigate our biggest financial disaster since Darien, writes Brian Wilson

AFTER an FSA whitewash, MSPs have a duty to investigate our biggest financial disaster since Darien, writes Brian Wilson

What is the point of the Scottish Parliament if it is neither willing nor able to hold an inquiry into the biggest financial disaster to afflict Scotland since the Darien Scheme – the collapse of our two greatest commercial institutions, the Bank of Scotland and the Royal Bank of Scotland?

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I have been asking that question, one way and another, since these tumultuous events occurred in 2008. Initially, I assumed that the Scottish Government would both demand and assert the right to hold its own investigation into the very distinctive Scottish elements of the financial crash. The exact opposite has proved to be the truth.

It was a great opportunity for Holyrood to show itself capable of addressing a task of deep historic, as well as current, significance. Through the calling of witnesses and the examination of evidence, MSPs could have done a rare service to Scottish society by laying bare the circumstances that led to these twin pillars crumbling into ignominy and by attributing responsibility wherever it lay, both within Scotland and beyond.

Some hope. While busying themselves with matters that would hardly merit mention in a trivia quiz, both the Scottish Government and the wider panoply of MSPs have been united on the great omerta – don’t mention the banks. Tens of thousands of Scots have lost their jobs, their businesses and a significant portion of their savings. It was by far the most cataclysmic occurrence to afflict Scotland since devolution. Yet there is no comprehensive explanation of what transpired or any attempt to achieve one.

When our descendants go looking for a definitive answer to how Scotland lost its great financial institutions, the last place they should seek it is in the Scottish Parliament – which preferred not to ask the question. Alongside the law, there was no more powerful symbol of Scotland’s distinctive character within the Union than the banks, long before political devolution was invented. But when it came to finding out how we lost them, Scotland’s politicians ran a mile.

Their feeble defence has been that financial regulation is not the responsibility of the Scottish Parliament which, of course, is true. But the Scottish economy is the responsibility of the Scottish parliament and it is absurd to suggest that an entirely legitimate rationale could not have been found – or could still be found – for a Holyrood inquiry into both causes and consequences, if the political will existed.

Instead, the politically significant point is that the will so obviously does not exist because it is all too close to home. Edinburgh is a small place and Scotland is a village. The Scottish people’s right to know has been subordinated to the establishment’s right to ensure that they do not know too much. I can well imagine the mandarins’ advice: “This is clearly a matter for the Financial Services Authority rather than for the Scottish Government.” What a relief.

Now the Financial Services Authority has produced its report on the Bank of the Scotland or, to be more precise, on one individual within it. In the course of a 92-page “final notice” on the transgressions of Peter Cummings, not one other person’s name is mentioned. That is an absolute travesty that destroys Holyrood’s fig-leaf defence that until the FSA completed its investigation into the Bank of Scotland, no other inquiry could exist.

For it is inescapable that there has still not been such an inquiry. It has all been about one man within the organisation. As the “final notice” recorded drily: “Mr Cummings complained that it seemed inherently unfair that he was the only individual to face disciplinary action for conduct which would be perceived as having caused the failure of HBOS.” I think “inherently unfair” is a gross understatement for unjust, outrageous and a deliberate evasion of bigger questions.

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The FSA findings deal purely with the manner in which Mr Cummings exercised his responsibilities. But from a Scottish public interest perspective, there are much wider issues that remain utterly unaddressed. For example, it is noted that in 2006 alone the total value of the top 30 “single name exposures” increased by 26 per cent from £19.2 billion to £24.2 billion. To whom were these phenomenal sums of money going – and how much of them has ever been repaid, other than from the public purse? Is there no right to know?

Reading the FSA report, I had a growing sense of unease that this really had been a kangaroo court with a predetermined outcome. In a grudging aside, the report acknowledged that Mr Cummings had “made efforts to implement improvements between January 2006 and March 2008 [but] failed to take reasonable steps to assess, manage or mitigate the risks involved in the aggressive growth strategy that the corporate division, under his direction, was pursuing”. Was nobody – no chairman, no director, no chief executive – overseeing either the strategy or the efforts?

Or even more pertinently – where was the regulator, aka the Financial Services Authority? The report states: “Mr Cummings questioned whether it was appropriate to criticise his conduct now, when during the relevant period the approach to risk management at corporate had been endorsed by the FSA”. That’s the self-same FSA who have been prosecutors, judge and jury in the trial of Peter Cummings. It stinks to high heaven and certainly has nothing to do with justice.

In response to publication of the FSA report, Mr Cummings called for “a wholly independent inquiry” into the failure of HBOS. Whatever else he did wrong, he is right about that one. And here is the opportunity for Holyrood to redeem itself. Now that the FSA has wiped its hands, the Scottish Parliament, at the request of the Scottish Government, should initiate an inquiry into recent events surrounding the Scottish banks. They should hire our most forensic QCs to assist them.

And right at the top of the witness list should be the jokers who presided over the Financial Services Authority.