UK Treasury Committee report angers banking industry body

The harsh words of John McFall's report have met with a frosty industry reception

LONDON - The UK House of Commons Treasury Committee has released its report on the financial crisis to criticisms by banks who say they have made strides with the government to reinvigorate the economy.

The 129-page document, 'Banking Crisis: dealing with the failure of the UK banks', says the financial mess will be felt for generations, and has received a scathing reception from the British Bankers' Association (BBA), accusing it of prioritising headline-grabbing over serious analysis.

"There are some useful points in the Committee's report. But the Committee has sadly sought headlines in this report, rather than their previous good analyses and that of Lord Turner," said Angela Knight, chief executive of the BBA.

The report praises the Financial Services Compensation Scheme (FSCS) set up to protect retail deposit holders, and favours more regulation to protect retail customers. MPs also make the suggestion that retail banking should be separated from investment banking - the opposite of what has happened in the US, where Wall Street's once dedicated investment firms have either collapsed or become bank holding companies.

"Bankers have made an astonishing mess of the financial system," said the committee chairman John McFall, MP. "The culture within parts of British banking has increasingly been one of risk-taking, leading to the meltdown we have witnessed."

The BBA says banks have been working to improve risk management and have been focused on restoring confidence and helping customers - pointing to a 5% increase in the volume of lending to UK small businesses over the past year.

"The industry acknowledged some time ago that in some banks the risk controls were not good enough," said Knight. "But many banks are in fact weathering this financial crisis, and it is unfortunate the Committee has not seen fit to recognise this.

"If we simply continue to blame the industry for all the problems of the economy in the UK, it will do little to help us out of the recession and will further damage the UK as an international financial centre," said Knight.

The Treasury report can be read here.