EU competition chief condemns 'crazy' banks

Banks and bankers were slammed as out of touch by Europe’s fair competition chief this afternoon.

EU Commissioner Neelie Kroes said bankers too often thought they were smarter than everyone else and could play by different rules.

But it was time the banking industry respected its customers and stopped believing it was better than them.

In a hard-hitting speech to pension fund managers in Amsterdam, Mrs Kroes said investors as well as banks had been too greedy in the run-up to the meltdown.

Now both sides had to look beyond short-term gain.

In particular, the banking culture had to change – driven if necessary by the European Commission’s competition authority.

Mrs Kroes, who described herself as the “referee” between investors and the banking sector during the economic crisis, condemned “crazy” banking practices and the “appalling” risks banks took while failing to understand obvious pitfalls.

She said: “It should not take Albert Einstein to see that problems might emerge in banks with a loan-to-deposit ratio of 180% – as part of the Lloyds Banking Group had.

“The Royal Bank of Scotland tripled its balance sheet in just two years from 2006....it was simply too big to operate and supervise.”

She said the culture of many executives towards market rules was changing but “maybe not in banking”, and regulators had to show they could control the banks.

“Part of that means promoting culture change in banks. I believe the smartest regulation in the world can’t make up for bad or reckless judgment.”

The EU Competition Commissioner went on: “If a banker can’t exercise good judgment and diligence, then it doesn’t matter how smart they are or how hard they work – the taxpayer is still left with the same bill, and that simply isn’t good enough”.

Ms Kroes said bank pay was not part of her regulatory brief, but the issue could not be separated from the banking culture and it was up to investors to change the culture.

She said: “Put simply, banks and the public are not speaking the same language. Too often bankers think they are better, smarter people who deserve different rules and different pay from everyone else. They can only think that if others let them”.

She added: “Now is not the time for tantrums: now is the time for the banking industry to show some respect to its customers, investors and the people who are often funding it all – taxpayers.”