UK lawmakers to probe how big banks are run

LONDON (Reuters): British lawmakers will probe how to improve the way big banks are run and set top pay after past attempts to strengthen corporate governance have had mixed results in constraining bonuses or controlling excessive risk taking.

Andrew Tyrie, Conservative chairman of the UK Parliament’s treasury select committee, said there had been progress in improving the running of banks but there was “still work to do” when it came to the boards of the country’s systemically important lenders.

He said in a statement the Treasury committee would launch an inquiry and would take evidence from the financial sector.

“Have you met anybody who thinks we have cracked this problem? Why was it that so many experienced and technically competent non-executives - the cream of British corporate life - appeared to be asleep in some of the boardrooms of our major financial firms,” Tyrie said.

He wants to encourage shareholders to engage on issues such as risk and bonuses.

Britain is still counting the costs of risk taking by the banking sector, having been forced to nationalise Northern Rock, buy most of RBS and a large stake in Lloyds.

Yet Tyrie is not the first to raise the issue of corporate governance in the financial sector. In one sign of increased investor activism, over a quarter of Barclays Plc shareholders voted against a remuneration plan including a 17 million pounds pay package for CEO Bob Diamond.

Tyrie wants the inquiry’s findings to shape the work of new regulators being set up next year when the Financial Services Authority (FSA) will be scrapped.

He declined to say if new laws would be needed to beef up supervision of the sector.

Hector Sants, who is stepping down as CEO of the FSA in June, said in his final speech on Tuesday that banks should improve their governance and “do the right thing” rather than be driven solely by the size of their pay packets.