THE Archbishop of Canterbury has interrogated executives of the
Royal Bank of Scotland (RBS) about the moral culture of the banking
business.
Archbishop Welby is a member of the Parliamentary Commission on
Banking Standards, which took evidence from the RBS a week after
the Financial Services Authority (FSA) fined the bank £87.5 million
for misconduct relating to the Libor rate between 2006 and
2010.
The FSA had found that misconduct at RBS was "widespread". At
least 219 requests for inappropriate submissions of the Libor rate
were documented, and at least 21 individuals and at least one
manager were involved in the "inappropriate conduct".
On Monday of last week, the Archbishop pressed Johnny Cameron,
the former chairman of Global Banking and Markets, RBS Group, on
his assertion that "you can't impose moral standards on people who
don't wish to be moral." He asked Mr Cameron: "How do you test for
the moral culture of a trading floor? Because from what you've
said, I get the impression you don't think it's possible." He
suggested that there existed in RBS "an incapacity to recognise the
human-generated risks".
Mr Cameron, after saying that the Archbishop was "straying into
very philosophical territory", argued that controls were in place
to protect banks against traders' misbehaviour, but no one had
envisaged "that Libor could be fiddled by a cartel of traders
across many banks". This had been an "enormous hole" in risk
management.
Mr Cameron agreed that nobody had blown the whistle on the
misconduct, and he could not suggest how a culture could come about
that would encourage even one person to do this. The Archbishop
said that banks should become "a heck of a lot simpler".
The Commission also heard from Stephen Hester, Group Chief
Executive. Mr Hester said that the behaviour of those involved in
the Libor scandal "had brought shame on the bank". It was redolent
of "a selfish and self-serving culture in the banking industry as a
whole".
But he argued that "we have done huge things to rescue a
situation for the company and for society".
The chairman of the RBS Group, Sir Philip Hampton, said that Mr
Hester had one of the most demanding jobs in world business; and
that his pay - potentially a package of £7.8m - was "modest" in
comparison to that of his peers.