In a damning report into the downfall of HBOS, the Parliamentary Commission on Banking Standards lays the blame squarely at the door of the trio that led the bank from its creation in 2001, via the merger of Halifax and Bank of Scotland, until its collapse in 2008.
“The HBOS story is one of catastrophic failures of management, governance and regulatory oversight,” says commission chairman Andrew Tyrie. “The commission concluded that primary responsibility for these failures should lie with the former chairman of HBOS, Lord Stevenson, and its former chief executives, Sir James Crosby and Andy Hornby.”
Mr Tyrie notes that so far only Peter Cummings, who headed HBOS’s corporate division between 2005 and 2008, “has faced regulatory sanction for HBOS’s failures”, having been fined £500,000 last September by the Financial Services Authority (FSA) and banned from working in the banking industry, reports The Telegraph.
Expressing “surprise” at that, Mr Tyrie says the commission has asked regulators to consider whether the other three individuals “should be barred from undertaking any future role in the sector”.
After an “aggressive” lending spree, HBOS collapsed at the height of 2008’s financial crisis as liquidity dried up in the wholesale markets. It was acquired by Lloyds Banking Group, but such were HBOS’s problems that Lloyds was forced into a £30bn bailout. The taxpayer now owns 41pc of the enlarged bank.
The commission criticises HBOS’s “incompetent and reckless board strategy”, calls its corporate governance a “model of self-delusion”, and complains about the lack of banking experience at the top. Sir James and Mr Hornby had come from the insurance and retail industries. It quotes Lloyds’ former chief executive, Eric Daniels, complaining that “talented amateurs” were put in charge of risk.
The FSA is also criticised for “thoroughly inadequate” regulation, but the commission reserves its most trenchant criticism for Lord Stevenson, claiming he has “shown himself incapable of facing the realities of what placed the bank in jeopardy”.
The report claims Lord Stevenson told the FSA after the rescue of US bank Bear Stearns in March 2008 that “without wishing to be the slightest bit complacent, we feel HBOS in this particular storm… is in as safe a harbour as is possible”. The report notes that HBOS was, in fact, “holed below the water line”.
A friend of Lord Stevenson hit back, saying the report’s credibility was undermined by the commission “pinning everything on management failure. Isn’t it a bit of a coincidence that 25 banks around the world all collapsed at the same time?” he said. “Are we meant to conclude that they all collapsed because of bad management.”
