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indeed worrying, that instances where individuals take responsibility for their actions and mistakes seem to be the exception rather than the norm in today’s society. We seem to have evolved into a society which does not hold its hands up when things go wrong, or if we do acknowledge a mistake it then becomes the fault of others or the system or the process.

Even in financial services where individuals are increasingly held to be responsible for their actions it has historically been the case that the overall firm is punished or censured rather than individuals.

Up until now it has almost been the case that the actions of the individual are somehow dealt with outside the overall results of these actions; corporate over individual responsibility.

In essence the theory seems to have been something along the lines of: ‘The firm employed them; the firm is therefore to blame’ – but we must question who is ‘the firm’ if it is not the directors and senior staff members who have signed up to specific responsibilities and no doubt are entitled to particularly large salaries because of those perceived responsibilities?

NortherN roCk

This is why the recent fines and censures issued by the FSA in relation to individuals at Northern Rock was somewhat surprising and at the same time, very welcome. David Baker, the former deputy chief executive of Northern Rock, was stung with a £504,000 fine because of his conduct in covering up the true extent of the lender’s arrears figures. Back in December 2006 Baker became aware that the true arrears picture had not been revealed in Northern Rock’s official figures and even though he investigated the matter a month later, he did not make this known further up the management chain, neither did he take any further action. Baker compounded this by issuing a string of misleading statements to

20 moRtgage intRoduceR JUNE 2010

external stakeholders about the impaired loans in question including market analysts – in these statements he quoted inaccurate figures, indeed if he had included the 1,917 loans which had been omitted from the arrears figures then they would have increased the overall arrears by approximately 50%. As a result of this not only did the FSA fine Baker but it also prohibited him from performing any function in relation to any regulated activity. Similarly Baker’s colleague at Northern Rock, Richard Barclay, who had held the

“ IT DOES SEEM THAT THERE ARE MANY MORE THAT SHOULD FACE THE MUSIC WHEN IT COMES TO THIS MOST RECENT OF FINANCIAL CRISES”

position of managing credit director, was fined £140,000 and prohibited from performing any significant influence function at an FSA-regulated firm. Barclay made the mistake of failing to

ensure that the management information reported by the lender’s debt management unit was accurate despite warnings at a very early stage about loan arrears and property possessions. Again the FSA was concerned that a true picture of Northern Rock was not available to senior management within the lender itself, analysts and the regulator so they could have a proper idea of its asset quality. Northern Rock has of course its own unique place in the history of the Credit Crunch and the near-collapse of many of our banks, which is why these fines generated a significant amount of media interest.

However, what is surprising is the very

few individuals who have so far been fined or hauled over the coals by the regulator.

Far be it for me to pre-empt any ongoing action however it may well stagger the public, and great swathes of those who operate under the FSA’s Senior Management Arrangement, Systems and Controls (SYSC), that so very few of the main protagonists who were undoubtedly culpable for some very poor decisions and judgements have not met the same fate as Baker and Barclay.

Let us not forget that Northern Rock was just one institution which fell off the cliff and had to be rescued by the taxpayer. What about those individuals at the other banks who made equally poor decisions, and not just those relating to misrepresentation of arrears and repossession figures?

FaCiNg the musiC

One could argue that there is a whole swathe of names who should be answering to the regulator and the people of this country because of the way they ran their businesses, the lack of safeguards and checks and the disastrous outcome of their management ‘style’.

Nick Leeson may well have taken down Barings Bank single-handedly back in the 1990s but it does seem that there are many more that should face the music when it comes to this most recent of financial crises.

At the time of writing there had been some signs of movement from the regulator in this area. Johnny Cameron, former head of

RBS’s investment banking division, has been forced to agree that he will not take any senior or full-time work in the financial services industry. That agreement between Cameron and the FSA came after an investigation into the management of the bank, where Cameron was chair of its investment banking business at the time it had to be rescued by the taxpayer in 2008. The FSA said that Cameron did not meet the right standard for a senior banker. Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48