John Hourican’s decision to quit Royal Bank of Scotland over its involvement in the Libor manipulation scandal has sent “a cultural shudder” through the 83 per cent state-owned bank, he has told a British inquiry.
Top bank executives must now abandon habits of displaying “blind trust” in highly paid market traders but, instead, be able “to trust, but verify”, he told the House of Commons Banking Standards Commission yesterday.
“I do accept responsibility for the failure of our staff and therefore I do accept responsibility for the failings that were found,” he told one of the commission’s members, the recently appointed Archbishop of Canterbury, Dr Justin Welby.
However, the commission chairman, Conservative MP Andy Tyrie, said Mr Hourican had acted “as a human shield” for others in RBS, who will remain on despite being in charge while the scandal was in full operation.
Mr Hourican, who was one of five senior RBS executives and directors to appear before the inquiry, was reputed to have been Ireland’s best-paid banker at the height of the credit boom.
The danger that market traders hunting for extra profits could gain illegal advantage by manipulating the Libor rates had been discounted because no one believed it could be done as so many banks were involved, the RBS said.
RBS did not make money from the trades, said Mr Hourican’s former colleague, Johnny Cameron: “We can’t say that it benefited the bank. It may have benefited one trader’s portfolio at the expense of another one. In fact, the bank might well be worse off.”
Mr Hourican, Mr Cameron and Peter Nielsen, RBS’s chief executive markets, who remains in his post, were clearly discomfited when the Archbishop of Canterbury asked how many whistleblowers had come forward. None, they replied.
“Why? Was there not one person anywhere who thought this is not the right way to behave?” the archbishop asked. “So how do you, in the future, set a culture, because it only takes one who says that is not the right way to behave?”
In the last year, Mr Hourican, born in Meath and educated at Gormanston and NUI Maynooth, said the bank had moved from “trusting people excessively to trust, but verifying”.
“I have in the last year sat at the desk and asked people to take me through what they were doing,” he said. He added that patterns surrounding after-hours office use, or whether people avoided taking continuous holidays, were monitored closely.
Transparency, rather than whistleblowing, was preferable.
“I want a culture in the company to be one of calling people to attention, rather than using a whistleblowing channel. Having lots of whistleblowing . . . in a company is almost as bad.
“We want a culture where people hold each other to a high level of moral account.”
He said RBS had recruited 1,000 graduates to change the division’s culture even while they were shrinking its size.
Questioned about the global ambitions of RBS during Sir Fred Goodwin’s time in charge, Mr Hourican said: “It was certainly too large. I would accuse the predecessor organisations of what I would call strategic tourism: too many places doing to do too many things with too little capital.”
Fourteen of the 21 RBS staff involved in manipulating rates had left, while seven were still involved in disciplinary proceedings, he said. He wanted all RBS staff to “stand up and feel the anger that exists around the country”.
