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BPF Annual Conference: We saw it coming , says RBS boss

RBS boss Stephen Hester has said that bank leaders and politicians stood back and did nothing as Britain went bust in front of the BPF annual conference and City minister Lord Myners today.

Hester, the former head of British Land, the UK's second biggest property firm, said "an early recovery could mean that problems take longer to solve."

"We're in a conventional recession. Recessions do take familiar patterns," he said.

City minister Paul Myners, the former director and chairman of Land Securities, said: "The cost of credit and colateral terms required are 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.

"We've had a seriously big night of drinking and recovery will take a while," added Lord Myners, the City minister.

Hester went on to say:

"From RBS's point of view we are not yet going up but the pace of decline has moderated substantially," Hester added.

"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. The imbalances were excess saving in the East and excess borrowing in the West. We all predicted this but forgot and got on with business.

"The economic recovery won't be secure until a significant proportion of those imbalances are corrected.

"An early recovery might not be our friend.

"The point when banks were toppling over has passed. They can now play their normal role. The banking system does have adequate wherewithall to provide for UK borrowing. We don't want an artificial withdrawal of credit as is happening at the moment, but this will pass.

"Clearly there is the same pattern but in spades for property: too much debt.

"Deleveraging will take years. Property went from 18pc to 40pc of UK lending during this decade.

"Banks have too much commercial property debt and have to get it down. RBS has 29pc. Because many can servive this debt we will play a long game acting responsibly to help customers manage their debt. This won't happen where there is no cash flow or where there is distrust.

He said: "We will never while I am chief executive lend as much. 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."

He said working through RBS's property debts would take three to five years, and described a gradual process that would leave little room for vulture funds to swoop.

"Courtesy of government support we have got the time to allow our customers to restructure themselves in an orderly way."

"Instead of vast amounts of cheap repossessed property this will be a long term recovery allowing things to be rebalanced."

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