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- Former Labour Prime Minister Gordon Brown has strongly criticised the British banking system for failing to change following the 2008 financial crisis. He argues in a new book that bankers are still being paid too much, and there are insufficient deterrents against misconduct and recklessness. Banks deemed “too big to fail” are “now even bigger,” he says.
LONDON – Former Labour Prime Minister Gordon Brown has vehemently attacked the British banking system, arguing in his new book that it failed to learn from the lessons of the 2008 financial crisis.
In his book My Life, Our Times, due to be published on November 7, Brown says “little had changed since the promise in 2009 that we bring finance to heel.” He condemns the banking system for continuing to pay bankers huge sums, arguing there are still insufficient checks and balances.
“The banks that were deemed ‘too big to fail’ are now even bigger,” he says. “2009 has proved to be the turning point at which history has failed to turn.”
Brown served as prime minister from 2007 to 2010, and stepped down as an MP in 2015. But he also served as chancellor for a decade before becoming prime minister, during the lead up to the crisis when the banking system had gone unchecked.
Brown warns that bankers are still being “rewarded for failure,” criticizing a system in which he says they are paid too much and bailed out when things go wrong.
“If bankers’ conduct was dishonest by the ordinary standards of what is reasonable and honest, should there not have been prosecutions in the UK as we have seen in Ireland, Iceland, Spain and Portugal,” he asks. Instead of being held criminally responsible for malpractice and recklessness, says Brown, the number of UK-based bankers earning more than €1 million has jumped by 50% to over 4,000 since the crisis.
This soft touch, he says, will “only give a green light to similar risk-laden behaviour in new forms.”
Although the UK introduced a new criminal change of reckless misconduct in financial services in 2016, Brown says bankers can circumvent this charge by claiming their behaviour was a product of structural problems within their institutions, and beyond their control.
A “more relevant” tool, he says, would be the 2006 fraud act, “which criminalizes fraud by false representation, failing to disclose information and abuse of position.”
Brown also heavily criticised former Royal Bank of Scotland (RBS) chief executive Fred Goodwin, who was fired and stripped of his knighthood following RBS’ £45 billion bailout in 2009.
“By the time the bank collapsed he [Goodwin] had from his company a private suite in the Savoy costing £700,000 a year, a fleet of 12 chauffeur-driven Mercedes limousines with RBS emblazoned all over them, and he regularly used a private jet at the weekend – whether for boar hunting in Spain or following the glamorous F1 circuit around the world,” says Brown.
He also said Goodwin had been the only banker to oppose a plan to spend up to £1 billion of “orphan assets” – those left behind by customers who had disappeared or died, without instructions for the future – on community causes.