Public accountability and crisis in the banking sector : the case of the UK

Abstract

The marked disintegration of the UK banking system in 2008 led to significant Government ownership in two major banks: The Royal Bank of Scotland (RBS) and Lloyds Banking Group (LBG) (National Audit Office, 2009). The banks are termed ‘quasi-nationalised’ due to the retention of stock exchange listings alongside Government ownership The thesis offers a documentary analysis on the public accountability of these banks. The research themes are: - The impact of Government intervention on the accountability of the quasi-nationalised banks - The banking crisis through the lens of financial reporting for RBS and LBG - Newspaper reporting of the banking crisis in RBS and LBG A multiple theory framework is utilised in the study. Property rights (Alchian, 1974; Alchian and Demsetz, 1973; Demsetz, 1967) and agency theory (Fama, 1980; Jensen and Meckling, 1976) explore the implications of Government Intervention. Impression Management and Stigma (Goffman, 1968; Goffman, 1956a) are used to critique financial reporting since the crisis. Critical Discourse Analysis assesses newspaper reporting of the banks’ finances (Fairclough, 2010; Fairclough, 1995). Summary findings for the three research themes are as follows. Quasi-nationalisation has been a positive response to the banking crisis. Banks acknowledge they must consider societal responsibilities as well as corporate profits. Yet the increased accountability mechanisms have been difficult to define and enforce. Property rights theory applauds the retention of private sector scrutiny. Agency theory, however, identifies the muted disciplinary effects of the markets in the circumstances. The banks’ financial reporting gives an alternative perspective on the banking crisis. Both banks acknowledge their role in the crisis but simultaneously distance themselves from it. RBS highlights the virtues of a ‘new’ bank different from the failed one. LBG explains poor results through ‘market dislocation’. The statutory accounts themselves are relegated in favour of managerially defined pro forma numbers and promotional materials. In this way, the statutory numbers can be seen as part of the ‘dirty work’ (Goffman, 1956b) of the crisis. Using critical discourse analysis (Fairclough, 2010; Fairclough, 1995), findings are that newspaper reporting of the banks’ accounting results occurs across a broad spectrum of titles and articles. Headlines favour big numbers for impact. But constant focus on banking pay endures. The accounts provide an important counterpoint to the news context of the banks. Positively, accounting is portrayed as a neutral challenger to the public relations news process and fulfils democratic accountability. Critically, however, it is in the interests of papers to create and sustain media panics (Leach, 2006). The thesis responds to calls for literature on the financial crisis (British Accounting Review, 2012; Journal of Accounting and Public Policy, 2011; Arnold, 2009), multi-theoretical research in the public sector (Jacobs, 2012; Kurunmäki et al., 2003), linguistic theory in accounting (Evans, 2010) and accounting in the tabloids (Jeacle, 2012) as well as interpretive research in financial reporting (London School of Economics, 2011; Brennan and Solomon, 2008; Parker, 2007).