UKFI back in the hot seat

Round two of taxpayer bank guarding body UK Financial Investments versus the question firing squad of MPs was more like a meeting of equals rather than a gaggle of teachers berating a couple of cowering schoolboys.
 
Maybe it was because outgoing chief executive John Kingman was flanked by more of his colleagues this time round - David Cooksey, Keith Morgan and John Crompton to name names.
 
Maybe he'd been practicing his lines in front of the mirror a la ex- banking bosses Sir Fred Goodwin and Andy Hornby this time. Or maybe it was the relief of knowing he is soon to depart for that lucrative job in the private sector (if you believe the speculation) that helped to inspire a more polished performance in the lion's den.
 
Gone were the stuttering responses as Kingman outlined the "major changes" being made from top down at Lloyds (LLOY) and Royal Bank of Scotland (RBS). No less than 14 directors, including the chairman and chief executive, have departed from the gilded towers of RBS since last autumn while Lloyds HQ has waved goodbye to five non-executive directors and welcomed Sir Win Bischoff as chairman, he recounted.
 
Gliding through the thorny topic of corporate governance, he declared RBS' risk exposure is "an absolutely massive job" and still very much a "work in progress." It could still take years though before the bank is run in a way which pleases its major stakeholders - and possibly its smaller ones.
 
With plans to break-up Royal Bank of Scotland and Lloyds being dissected, analysed and cogitated in the public domain, Kingman maintained that UKFI is doing its best to turn a profit on the taxpayers' stake.
 
"I would certainly expect us to see a positive return on our portfolio over time," he announced in his clipped accent.
 
With his colleagues barely getting a look - let alone a word - in, Kingman deftly swatted away questions over concerns that more competition in the banking sector could lead to banks being small enough to be allowed to fail.  
 
In a flurry of hand movements, he admitted that these smaller entities might not fetch the highest price as the government bids to introduce more competition into the market. "It might be that some of these businesses will be sold for less to a new player than they would have if they were sold to a really big player."
 
However, he stressed that the four-year time period for the sale meant the banks were "not facing the danger of having to make fire sales".

RBS' bonus pot also received plenty of talk time with Kingman claiming UKFI is "walking a tightrope" when it comes to giving the nod to serious sums for senior executives at Lloyds and RBS.

It was, he said, blinking furiously, a question of balance. "We want to change the culture ... We have to work for the public and the public are understandably angry about the payment of bonuses in the banks in which we are invested but we as shareholders have an interest in holding these banks together.

"We cannot afford to be in the position where the banks lose so many people that we start to lose serious value."

RBS and Lloyds have both bowed to demands to not pay out cash bonuses to workers on less than £39,000. But how much is the RBS bonus pot? the MPs barked.

Kingman refused to be drawn on the exact figure for share-based bonuses, much to the irritation of the assembled MPs. It's "vastly lower" in 2008, he said. How much? the MPs Using the old "its commercially sensitive" and 'the Chancellor told me not to' excuse he lapsed into silence and folded his hands in front of him. The MPs glared.

But he did reveal that RBS chief executive's Stephen Hester has had his own pay linked to the lending targets as small businesses continue to feel the effects of credit deprivation in the recession.

Alas the MPs could not resist a little poke at the lack of interest in taking over the reins. Wrapping up on a light note, John McFall asked whether was setting himself up as a role model for the job. No, Kingman reassures, a smile -whether of genuine amusement or relief at finally having escaped the clutches of the Treasury Select Committee - breaking across his face. And with that he exited stage left.

Tune in next time to see how his successor Robin Budenberg fares in the hot seat...