For those in Ireland who think more people should have been hauled before the courts for the reckless operation of the Irish banking sector in the bubble years, it may come as some solace to hear that there are those on the other side of the Irish Sea who feel exactly the same.
Paul Moore, a former head of group regulatory risk at Halifax Bank of Scotland (HBOS), says there have been no real criminal convictions in the UK arising out of the banking catastrophe there and that little has changed in terms of keeping watch of the UK's banking sector.
Moore's evidence to a parliamentary committee in London in 2009 that he had warned HBOS about excessive risk in the early 2000s – and was fired for his trouble – led to the bank's former chief executive, Sir James Crosby, resigning as deputy chairman of the Financial Services Authority after Moore's testimony.
The UK's parliamentary commission on banking standards published a report on HBOS in 2013 entitled An Accident Waiting to Happen which savagely attacked management and the board at the huge bank for taking on excessive risk in their effort to win new business.
Moore, who will be addressing the annual Chartered Secretaries conference in Dublin on Tuesday, May 26th, strongly believes the governance system for large banks such as HBOS is still a long way from adequate.
But the “very big picture”, he says, is that the legal privilege of limited liability, when it was invented, was never meant to apply to corporations, be they banks or otherwise, with budgets that rival those of small nations.
Damage to economy
It is self-evident, he argues, that if a corporation such as HBOS has the ability, through its collapse, to cause the kind of damage to the economy that we are all too familiar with here in Ireland, then the responsibility of its directors cannot be primarily to its shareholders.
For large corporations, the duty needs to be to society as a whole, he believes. This is particularly so given that studies have shown that senior corporate executives are three times more likely to have sociopathic or psychopathic tendencies, when compared with society generally.
“The wrong people get to the top of these organisations,” he argues. Senior corporate executives, and not just in banks, tend more towards narcissism, difficulties with empathy, greed, and a lust for power, he says.
Given this, strong risk, audit and regulatory control are needed. But as matters stand, he says, they are all weak.
“Auditing is a waste of time,” according to the former KPMG employee. There are simply too many conflicts of interest between firms’ audit work and their non-audit work.
Risk management and compliance managers cannot do their work properly without putting their own jobs at risk. New structures need to be put in place to seek to address this issue, Moore says.
As to regulation, he believes financial regulation needs to have a division between those who have to maintain a close and good relationship with senior bank management and those whose job it is to investigate and prosecute suspected wrongdoing.
The latter responsibility has to be carried out by people who are “very nasty” and who are rewarded for any cases they bring to successful prosecution.
‘Broken’
“The whole system is broken,” Moore says. “Chief executives are focused on how much profit they can make, as quickly as possible, yet banks by their nature should be prudent.”
Senior executives can be making multimillion annual salaries, yet they may not be taking any risk with their own money.
At HBOS, the risks involved the bank, at its peak, borrowing short and lending long hundreds of billions of euro. Activity such as that, given the risk to society generally that it involves, needs to be very tightly monitored.
Yet Moore, a trained risk expert, says he cannot any longer get employment in his chosen profession, because he has spoken out.
