ROYAL Bank of Scotland's chief executive admitted yesterday that businesses and politicians all saw the conditions that exacerbated the banking crisis coming but collectively did nothing about it.
Speaking at the British Property Federation annual conference in London, Stephen Hester maintained that the problems affecting the banks were just part of the global economic crisis.
Hester told the conference: "It's vital we realise its not just
a banking crisis but one of macro economic imbalances, with the banking sector mirroring these. We all saw this coming but none of us did much about it."
Hester said the imbalances in the world economy were "excess saving in the east and excess borrowing in the west. We all predicted this but forgot and got on with business."
The RBS chief executive, also the former head of property giant British Land, said the economic recovery would not be secure until a significant proportion of those imbalances are corrected.
However, he also indicated it was possible an early superficial economic recovery would mean that problems related to these imbalances – the need to save more and spend less in the west and the reverse in the east – might take longer to solve.
"We're in a conventional recession. Recessions do take familiar patterns," he added. "An early recovery might not be our friend."
Hester told the meeting, at which City minister Lord Myners was present, that "the point when banks were toppling over has passed".
He maintained that the banking system now had adequate wherewithal to provide for UK borrowing.
The artificial withdrawal of credit by some banks was unwelcome, Hester added, "but this will pass".
And the RBS chief said a common problem confronting banks currently was debt "but in spades for property".
He said: "Deleveraging will take years. Property went from 18 per cent to 40 per cent of UK lending during this decade."
RBS had 29 per cent of its debt in commercial property, and he pledged he would rein this in.
"We will never, while I am chief executive, lend as much," Hester promised. "Banks have got too much commercial property debt and need to have less. Over the years that will have to change and it will depress the market."
Myners, also the former director and chairman of Land Securities, said that the cost of credit and collateral terms required was inevitably going to be more demanding than before the financial crisis.
"Quite frankly banks were being foolish in some of the terms they were offering," he said. "We've had a seriously big night of drinking and recovery will take a while."
