At least someone believes in holding banks to account

November 21st, 2009

Neelie Kroes, EU competition commissioner, image courtesy of Vrouw & Media

Neelie Kroes: A woman of principle, image courtesy of Vrouw & Media

God, I wish there was someone in high office here in the UK who had the principles and moral compass of the European competition commissioner Neelie Kroes. Instead, we’re having to make do with spineless individuals likes Alistair Darling and Gordon Brown, whose main prerogative seem to be to sweep blatant wrongdoing by leading British banks under the carpet in the hope nobody notices.

Kroes singlehandedly overturned the complacent view of UK ministers that it was perfectly acceptable for UK citizens and small businesses to shoot themselves in the foot by paying to preserve failed banking giants of yesteryear such as Lloyds Banking Group and Royal Bank of Scotland — relics of a dangerously hubristic and immoral age — in aspic.

Kroes forced “in denial” and clearly out-of-their-depth politicians like Darling to recognise that it was unacceptable for UK taxpayers to have to fork out billions to keep disastrous institutions such as RBS and Lloyds afloat and intact — even though the resultant oligopoly was clearly against their interests.

Now Kroes has told institutional investors they have been asleep at the wheel — and reminded them of their duties as owners. Speaking at a conference on socially responsible investment in Amsterdam, she reminded pension funds that one of their roles is to ensure that companies in which they invest — including banks — behave ethically and responsibly.

In the words of specialist magazine I&PE, Kroes told pension funds that “they have a responsibility to help keep banks on the straight and narrow.” The Dutchwoman added that pension fund investors should “waste no time in confronting and denouncing corporate misbehaviour in corporations in which they invest.”

Institutional investors in basket-cases such as HBOS (now Lloyds Banking Group) and Royal Bank of Scotland singularly failed in this regard. During the go-go years, the pension funds were only too happy to egg on self-deluded executives who ran such organizations, including Andy Hornby of HBOS and Sir Fred Goodwin of RBS, to take more and more outrageous risks.

Ignore any post-rationalisation that you may have heard from institutional investors since the crash. Just remember that on August 10th, 2007, 94.5% of RBS shareholders voted in favour of Sir Fred’s insane plan to acquire the subprime-riddled ABN Amro.

For more of a flavour of how institutional investors singularly failed to keep rogue bankers in check during the boom, read HBOS: When did the rot set in? And were shareholders asleep at the wheel? and / or Banking’s Abu Ghraib.

Kroes told pension fund investors that given their status as shareholders — i.e. owners — they  must do more to hold financial institutions to account. She also said that, given their exalted position, they are able to intervene and stop wrongdoing at a much earlier stage than the European Commission.

Whereas an investor is able to have a quiet word with the chairman of an institution that is moving ‘over the dark side’ over port and cigars, Kroes pointed out that the European Commission can only take action after court approval.

She told pension funds that they have the ability to voice the concerns and interests of the ‘average Joe’, but that they are not doing this nearly enough. “Think of it as the Dutch version of the ‘Main Street versus Wall Street’ debate,” she continued.

Kroes made the remarks at a symposium on responsible investing organized by APG, an asset management arm of Holland’s giant public sector pension scheme ABP.

No wonder the Dutch people I know describe Kroes as a woman who “has hair on her teeth.”

The only person in high office in the UK who remotely shares Kroes’s moral backbone when it comes to dealing with errant bankers and re-ordering the world of finance is the FSA chairman Lord Turner. (See Taming the wild beast.)

Short URL: https://www.ianfraser.org/?p=972

Posted by on Nov 21 2009. Filed under Blog. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

4 Comments for “At least someone believes in holding banks to account”

  1. Absolutely right. The vast majority of the British Public BACK the views of Neelie Kroes! This brings us to the next ‘big issue’: what have they done to our democracy? The rotten core comes from the fact that the banksters are funding the political elite …

    So what are we going to do about it? There is an uprising taking place and it will not be long before the tables are turned. Take the Royal Charters, which permit the establishment to commit deceptions — how so? Or the fact that the Judges in our courts do not have their christian names divulged — why can this be? Is it in case they have committed crimes or have unsavoury records? All the obfuscation and “one rule for you and one rule for them” is unworkable for the British People, and will no longer be tolerated.

  2. I think I may have been a bit harsh on the UK government in the opening para of this blog post. I have since read an article in the Daily Mail which reminded me that certain UK politicians including Lord Myners have been calling on investors to stop behaving like “absentee landlords”, and start taking their duties as owners more seriously. Apologies.

    Ian Fraser

  3. Good write-up and good layout, is this a regular template?

  4. This is a wp site but the visuals were designed by Stream Media in Glasgow (part of Axis Media Group). I suggest you address you query to Peter Johnstone (the guy who designed it at Stream.) His email is peter@axismediagroup.co.uk

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