What do bankers tell their parents?

Back in January 2010 I wrote in A Moral Profession about a post by Stefan Stern, passing the parent test, in which he referred to the remark by Stephen Hester, chief executive of Royal Bank of Scotland, to the Treasury Select Committee: “If you asked my mother and father about my pay they would say it is too high.” Stern went on (and this is what caught my eye),

We should always be ready to explain to close family members what it is we do at work, and why. The FT columnist John Kay prefers this sort of practical morality to any sort of imposed code of behaviour. If you would be embarrassed telling friends or family about aspects your job, the chances are you should not be doing it, he has said.

This came to mind yesterday for two reasons: first the furore over Jimmy Carr’s tax avoidance; and secondly because of the remarks by Mr Justice Peter Smith in relation to the discontinuance of disqualification proceedings brought against the directors of the Farepak group. The judge’s full statement is here.

Mr Justice Peter Smith was pretty damning about the way the case was brought – and there will be more when the costs application is heard. At paragraph 76:

The result was that by the close of the Secretary of State’s evidence all of the main players who have been called in effect did not support the Secretary of State’s contention that the defendants had done anything wrong.

But he reserved his most withering remarks for the way that HBOS had behaved in the period prior to the Farepak group’s insolvency. Paragraph 116 is particularly damning:

The bank had, as I have said, almost a pride in their strong attitude, but they went beyond that of course because they in effect forced the directors to carry on in September/October collecting deposits, that at a time when they believed there would be an insolvent solution; they had missed it in August, but they expected it to happen later. During that period, as I have said, their exposure was reduced by £4 million, of deposits that came in in that period, and £6 million was used to carry on trading the companies, which were then sold in the pre-pack.

And in paragraph 117:

HBOS knew that those deposits would be paid and would be lost if their expected solution went out and that the only beneficiary of those deposits would be HBOS and secured a maximum return for HBOS.

And then in paragraph 122 :

This is not a court of morality, but I would suggest that HBOS really ought to look at the collections that they took in September and October and seriously consider whether or not they ought to make a further substantial payment to the compensation fund. It seems to me that what happened there, whilst apparently legally acceptable, might not be regarded in the public’s eyes as being acceptable. I cannot force them, it is entirely a matter for them.

HBOS is not happy with the statement and has said that the bank and its staff “acted entirely appropriately” and that the bank

made entirely reasonable decisions based on the information available to it at the time. . . The bank will of course consider the judge’s comments but does not agree that it acted inappropriately, as the judge has suggested.

Well (the Mandy Rice-Davies defence), they would say that, wouldn’t they.

I wonder how they are explaining things at home.


Author: wilks

I called myself Wilks when I first started blogging. The idea was that it would afford a measure of anonymity. For much the same reason, there was no photo. Times change, hence the photo, but I decided that even when I changed the blog’s title at the start of 2009, I should remain Wilks.