Sir Fred Goodwin and his erstwhile boardoom colleagues faced fresh scrutiny after they were criticised by one of Scotland's senior businessmen and as regulators were reported to have launched a fresh investigation into the conduct of former Royal Bank of Scotland directors.
David Watt, head of the Institute of Directors in Scotland, said the disastrous losses that left the bank requiring a massive bailout by the tax- payer were caused by "a failure of leadership and governance".
He warned that financial services players ran the risk of repeating the kind of mistakes that devastated Royal Bank unless there was a big change in the culture prevailing in the country's boardrooms.
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While Goodwin recently told MPs it was unfair to blame him for the bank's problems, Watt said the former chief executive of the bank had to shoulder responsibility.
Goodwin was the architect of a strategy of acquisition-led growth that culminated in the bank pressing on with the purchase of ABN Amro bank in 2007 despite clear signs that the credit crunch would cause a serious slowdown.
Watt criticised Goodwin for failing to listen to those who questioned the wisdom of the strategy. "Somebody understood that the challenges that Royal Bank was getting involved in were becoming too risky and that buying ABN Amro was not very wise," said Watt. Goodwin is said to have run the bank in a domineering fashion, which meant subordinates were not allowed to express dissenting views "His leadership culture left a lot to be desired to put it mildly," said Watt.
However, he said the problems resulting from Goodwin's misjudgments could have been avoided if his fellow directors had done their jobs properly.
Non-executive directors are employed to act as a check on executives and to ensure that the strategies they pursue are sound. "They should have been asking fundamental strategic questions like, Which countries are we investing in?', and that would have revealed that the bank was investing heavily in countries where there could be serious difficulties if things did not go to plan," said Watt.
His comments show that the debate about what went wrong at Royal Bank is still very much alive despite the efforts of the new management team to draw a line under the past.
Chairman Philip Hampton called for an end to "public flogging" of the bank at last month's general meeting.
On Friday, Chancellor Alistair Darling joined the attack on the management of banks that ended up requiring life support from the Treasury.
"There is a feeling that in a number of boardrooms that a number of people, non-executives in particular, did not ask the questions that they should have asked," he told industry leaders in Edinburgh.
Yesterday it was reported that the Financial Services Authority (FSA) had appointed the giant accountancy firm Pricewater- houseCoopers to investigate the conduct of former board directors of Royal Bank.
The investigation will cover risk management processes and the information provided to investors about Royal Bank's financial position. The FSA and Royal Bank both declined to comment on the report.
Watt said failings of leadership and corporate governance appeared to have affected other banks, including HBOS, which owned Bank of Scotland.
This became the subject of a government-brokered takeover by Lloyds TSB Bank after it hit the buffers because of overly-aggressive lending in the property and housing markets.
Sir Victor Blank will retire in the next year as chairman of the enlarged Lloyds Banking Group.
Some investors were unhappy that the hasty takeover left Lloyds saddled with massive debts.
Governments around the world are developing proposals to try to ensure there if no repeat of the crisis in the financial sector that has dragged the world into recession.
Watt warned that a response focused on regulation would fail. He said fundamental changes in boardroom practices and cultures were required.
Non-executive directors should receive training to ensure that they are able to exercise their supervisory functions adequately. They needed to ensure that companies pursued sustainable long-term growth rather than short-term targets.
Remuneration policies should not reward employees for actions that brought short-term gain at the risk of losses in future.
Directors should be recruited from a much broader range of back-grounds to ensure that boards reflected the interests of their companies customers.
"What got us here won't get us out," said Watt.
"We can't believe that continuing to do what we've done for the last 20 years will get us improvement; it won't."
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