Bank bosses "sorry"
Sorry was the word of the day, as former bosses of HBOS and Royal Bank of Scotland faced up to MP's scrutiny over their roles in the banking crisis.
Sir Fred Goodwin and Sir Tom McKillop of RBS and Andy Hornby and Lord Stevenson of HBOS were grilled over bonuses, executive pay, their qualifications and the disasterous string of decisions that forced the banks into the arms of the Government.
They started their defence by offering their apologies to all those affected by the chaos.
Lord Stevenson, former chairman of HBOS said: "There has been a lot of talk about the 'S' word and [this] has given [us] the opportunity to say what we said to shareholders are profoundly and unreservedly sorry at the turn of events.
"Our shareholders have lost a great deal of money and we are very sorry for that. There has been huge periods of anxiety and uncertainty. We are sorry for the effect it has on the communities we serve."
Speaking in controlled voices backed up by carefully managed gestures, the chiefs admitted that mistakes had been made but also reiterated that the "collapse of the wholesale markets" which exacerbated the chaos came as a complete shock.
Sir Fred, the former chief executive of RBS, said: "I think everyone saw it was going to come at some point but for it to turn in the way it has and so profoundly and globally is the part that has caught everyone out. It was not possible at the time to envisage."
Lord Stevenson said HBOS' reliance on the wholesale markets for funding and its failure to predict the credit crunch proved to be its downfall. However, despite his apology, Hornby said he was not "personally culpable" for what happened to the bank.
ABN Amro disaster
Sir Tom and Sir Fred also came in for heavy criticism for destroying "a great British bank" and costing the taxpayer £20 million. They were quick to admit that the ill-fated £10 billion takeover of ABN Amro in October 2007 had been a mistake.
Sir Tom said: "We bought ABN Amro at the top of the market. We did in fact make a bad mistake. At the time it did not look like that. It is easy in retrospect." He added that, "the bulk of what we paid for ABN Amro will be written off as goodwill."
The RBS chairman also pointed out that more than 90% of shareholders had supported the deal at the time and it had the approval of the regulators.
All the former chiefs conceded that the bonus system needs to be reviewed, with some bankers receiving up to 10 times their salary as an end-of-year financial reward.
Sir Tom said: "I believe that the events that have occurred and the situation we are now in should give us an opportunity to look fundamentally at the remuneration practices going forward. But I do believe that it needs to happen across the board."
Hornby, the former chief executive of HBOS, added that these should be linked in with long-term performance and paid over a longer time scale of up to five years. He said: "There is no doubt that the bonus system in many banks around the world has proven to be wrong in the last 24 months.
"If people are rewarded [in] purely short-term cash form and are paid very substantial short-term cash bonuses without it being clear whether these decisions over the next three to five years have proven to be correct, that is not rewarding the right type of behaviour."
However, Sir Fred disagreed that risk-taking had sent the banking crisis spiralling out of control, believing that traders were simply doing their job.
He said the bonus culture came over from the US and was quickly absorbed into banking culture in the UK. "It is absolutely a cultural thing. People do move around the market. If people do not feel they are properly remunerated, they will move," he said.
Sir Fred himself said he had not received a bonus in 2007, but his salary came in at £1.46 million. Hornby said he had not received a bonus for 2007 and had only taken them in shares during his two years at HBOS. Both said they had lost more money than they made during their time at the top.