THE CITY&nbsp;launched a counter-offensive against MPs yesterday, after the Treasury select committee criticised Lord Adair Turner&rsquo;s review of regulatory reform and cast doubt on Sir David Walker&rsquo;s suitability to lead a review of corporate governance in the banking sector.<br /><br />The influential group of MPs concluded in its report on the role of remuneration in the economic downturn, that the banking crisis had &ldquo;exposed serious flaws and shortcomings in remuneration practices in the banking sector and, in particular, within investment banking&rdquo;.<br /><br />The committee, said that the Turner review &ndash; FSA chairman Lord Adair Turner&rsquo;s paper on regulatory reform - had downplayed the role that remuneration played in causing the crisis and called on the FSA to do more to address the issue.<br /><br />Angela Knight, the chief executive of the British Bankers&rsquo; Association immediately leapt to Turner&rsquo;s defence, saying that his review &ldquo;has been considered internationally as one of the best&rdquo;.<br /><br />And sources within the FSA pointed out that the organisation was preparing to write into its rulebook a proposal from its consultation paper on remuneration requiring firms to operate pay policies &ldquo;consistent with and promote effective risk management&rdquo;. The committee also questioned whether Sir David Walker was the right man to conduct a review of corporate governance in the banking sector, given the former Morgan Stanley chairman&rsquo;s proximity to the City.<br /><br />In a document laden with criticisms, the committee, led by Labour&rsquo;s John McFall, attacked shareholders for failing to engage properly with the companies they invested in and also laid blame at the door of auditors who it said had &ldquo;failed to highlight developing problems&rdquo;.<br /><br />The system of non-executive directorships should also be overhauled, the committee said, to ensure that non-executives had enough time and expertise to fulfil their role, as well as ensuring diversity of experience among supervisory board members.<br /><br />The committee said there was a strong case for scrapping all bonuses at the recapitalised Royal Bank of Scotland and Lloyds Banking Group, but conceded that such a move would damage the banks&rsquo; recovery.<br /><br />But it lambasted City minister Lord Myners for putting too much faith in an &ldquo;incompetent&rdquo; RBS board, which allowed chief executive Sir Fred Goodwin to leave with a &pound;703,000 a year pension.