Given how deeply the global financial crisis impacted – and continues to impact – us all, there weren’t many bearish market commentators that were keen to gloat about their doom-laden predictions coming to pass.
But with the passing years and with more facts continuing to emerge about just what caused (part of) the downfall, it feels like a more appropriate time to say “I told you so”, particularly given that some of the key protagonists have admitted culpability.
Erstwhile HBOS chief executive Sir James Crosby is the latest to offer his apologies for his part in the British banking collapse, admitting internal incompetence was just as much to blame as external factors for the bank’s instability.
HBOS and its array of brands was by no means alone in its irresponsible behaviour before the credit crunch, but it displayed particularly poor judgement in regards to its lending practices, pricing and the marketing of its mortgage products. Few were willing to speak up against it when the going was good, but I was always deeply suspicious of the tactics it adopted and was not in the least bit surprised when the wheels eventually came off in such spectacular fashion. As for Crosby’s belated apology, while it is gratifying for him to accept some responsibility for his actions, it rings a little hollow when you consider he hasn’t relinquished his knighthood, nor given up his pension or other financial entitlements.
The actions of Crosby and others is precisely the reason why the Mortgage Market Review has to change the actions of lenders for ever. As Andy Haldane, the Bank of England’s executive director in charge of financial stability, so succinctly put it recently, the cost of the financial crisis will most likely still be being paid by our grandchildren, so we quite simply can’t afford for there to ever be a return to the days of gratuitous credit availability for all.
Despite everything that has gone on, there are still those who believe that the current situation is just an aberration and that banks have already begun to effectively self-police their behaviour and shown a willingness to lend responsibly. However lenders have long lost the right to that privilege. It may sound harsh to say, but there needs to be a much stronger framework in place that goes way beyond ‘sorting it out ourselves’ and the MMR will go some way to avoiding a repeat of the nightmare we are yet to fully emerge from.
It is highly likely that the Parliamentary Commission on Banking Standards will continue to throw up more gems in the mould of Crosby’s contrition, but while the sands of time afford us something of a wry smile at such admissions, the seriousness of the implications should never be forgotten. Indeed, Haldane himself likened the impact of the financial crisis on the economy as similar to what a world war would have created. When you read comments of that gravity, you can understand why the regulator is keen to impose tougher legislation on the banking system and why so much power must never again be trusted to a handful of individuals.
Bob Young is managing director of CHL Mortgages
