HBOS collapse: Ex-bosses face calls for City bans

James Crosby, Andy Hornby and Lord Stevenson

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Financial regulators should consider banning three top HBOS bankers from senior roles in the financial sector, an influential committee has said.

The Banking Standards Commission said former bosses Sir James Crosby, Andy Hornby and Lord Stevenson were guilty of a "colossal failure" of management.

HBOS collapsed in 2008, wiping out shareholders, costing thousands of jobs and forcing a £20.5bn taxpayer bailout.

On Friday, Sir James resigned as an adviser to investment firm Bridgepoint.

The BBC understands that he was asked to resign by the board of the private equity firm following the publication of the HBOS report.

So far, there has been no response from the three men to the findings.

Banking Standards Commission chair Andrew Tyrie says there had been "a colossal failure of leadership"

The Banking Standards Commission was set up to improve the UK's banking system following the 2008 financial crisis.

Its members are MPs, members of the House of Lords and the Archbishop of Canterbury.

Its report criticised the now-defunct City regulator the Financial Services Authority (FSA), saying the watchdog appeared "to have taken no steps to establish whether the former leaders of HBOS are fit and proper persons to hold the approved persons status elsewhere in the UK financial sector".

The Chief Secretary to the Treasury, Danny Alexander, said the government would consider whether more should be done to hold those responsible for HBOS's demise to account.

"Unfortunately, the regulatory regime that was in place at the time was nowhere near tough enough," he said.

"We're just taking action this week as a government to put in place a tougher, new regulatory regime to try and make sure that some of the mistakes that were made can't happen again."

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This report stands out as a cracking page-turner. It's because its authors have a cracking turn of phrase and because they have made it about the people at the top of HBOS, and their individual and collective roles in driving it spectacularly over a cliff ”

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The report, called An Accident Waiting to Happen, paints a damning picture of the management failures leading up to the collapse of the bank at the height of the UK's banking crisis.

It estimates that 96% of shareholder value was wiped out when the bank collapsed, costing taxpayers £20.5bn.

Lloyds Banking Group, formed from the merger of Lloyds TSB and HBOS in 2009, has since cut tens of thousands of jobs and remains 39% state-owned.

The banking crisis also precipitated the economic slump from which the UK is still struggling to recover.

The commission accused the bank of "reckless" lending policies that resulted in losses of £46bn.

Such losses would have led to insolvency, had the bank not been bailed out by the taxpayer and Lloyds TSB, the commission claimed.

'Too much risk'

The commission concluded that two former chief executives, Sir James Crosby and Andy Hornby, were mainly to blame for the collapse of the bank, together with its former chairman, Lord Stevenson.

"The primary responsibility for the downfall of HBOS should rest with Sir James Crosby, architect of the strategy that set the course for disaster, with Andy Hornby, who proved unable or unwilling to change course, and Lord Stevenson, who presided over the bank's board from its birth to its death," said the report.

"Lord Stevenson, in particular, has shown himself incapable of facing the realities of what placed the bank in jeopardy from that time until now."

In written evidence to the commission last December, Lord Stevenson admitted that the bank took on too much risk in the run-up to the 2008 financial crisis.

Who are the HBOS three?

Andy Hornby, chief executive of HBOS from 2006

  • Degree in English from Oxford University and MBA from Harvard Business School
  • 1996 - 1999: Senior roles at Asda, including managing director of the George clothing brand
  • 1999 - 2008: Senior roles at Halifax and later HBOS, becoming chief executive in 2006
  • 2009 - 2011: Chief executive of Alliance Boots
  • 2011 - Present: Chief executive of bookmakers Coral

Sir James Crosby, chief executive, HBOS chief executive from 2001 to 2006

  • 1994: Joins Halifax bank as managing director of Halifax Life after 20 years in financial services
  • 1999: Becomes chief executive of Halifax, and first chief executive of HBOS in 2001
  • 2004: Appointed a non-executive director of the Financial Services Authority (FSA), while still head of HBOS
  • 2007: Becomes deputy chairman of the FSA following resignation from HBOS in 2006
  • 2009: Resigns from FSA
  • 2006 - Present: takes on various roles including non-executive director of Compass Group, chairman of Mysis, a trustee of Cancer Research UK, and an advisory role at private equity firm Bridgepoint
  • 2013 - asked to resign by board of Bridgepoint

Lord Stevenson, chairman of HBOS from 2001 to 2008

  • Begins business career in the 1960s after leaving university
  • 1979 - Present: Takes on several non-executive directorships at companies including BskyB, Pearson, Manpower and Western Union.
  • 1997 - 1999: Knighted and later made a peer for life, taking a seat in the House of Lords
  • 1999: Appointed chairman of Halifax, and later HBOS after its formation in 2001
  • 2008: Stands down as chairman of HBOS
  • Presently director of Cloaca Maxima, a consultancy, and non-executive director of Waterstone's

The former head of wholesale banking at HBOS, Peter Cummings, was fined £500,000 and banned from working in senior financial roles by the FSA last year.

But the Commission expressed surprise that no-one else had been punished.

While the three executives saw their "Approved Person" status at HBOS lapsing, they did not face any further sanctions.

An Approved Person is someone who is permitted to carry out particular financial functions by the FSA.

"The FSA appears to have taken no steps to establish whether they are fit and proper persons to hold Approved Person status elsewhere in the UK financial sector," said the report.

Flawed strategy

The report said the strategy set by the board after 2001 "sowed the seeds of its destruction".

That was the year in which the Halifax and the Bank of Scotland agreed to merge, forming HBOS.

Its losses of £46bn included losses of £25bn in its corporate division, and £14.5bn in Australia and Ireland.

Senior executives of HBOS tried to blame the losses on the temporary closure of wholesale markets.

During the financial crisis, banks stopped lending to each other, resulting in their short-term supplies of funding drying up.

But members of the commission said they were disappointed by such explanations, as it was the lending approach that was to blame.

"This culture was brash, underpinned by a belief that the growing market share was due to a special set of skills, which HBOS possessed and which its competitors lacked," said the report.

"This was a traditional bank failure, pure and simple. It was a case of a bank pursuing traditional banking activities and pursuing them badly."

Lloyds Banking Group stressed that the relevant events happened before it owned HBOS.

"We continue to focus our efforts on rebuilding the group for the benefit of our customers, employees and shareholders," its spokesperson said.

Ray Perman, the author of Hubris: How HBOS Wrecked the Best Bank in Britain, said the commission's criticism was unusual in singling out individuals.

"For the first time, blame is squarely pinned on the people who deserve it - the chairman, the two chief executives," he said.

"What they did was to pursue a very fast growth strategy, regardless of the risk and they fooled themselves into thinking that their initial success was [because] they were better than everybody else, but eventually those risks caught up with them."

Failure of regulation

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It is unprecedented for MPs and peers to suggest that a group of senior bankers should be banned from working in the City”

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The commission said the FSA's regulation of HBOS was "thoroughly inadequate".

In the three years following the merger, it said, the regulator managed to identify some of the issues that would contribute to the group's downfall, such as its aggressive pace of growth and its reliance on wholesale funding, as opposed to using its own savers' deposits.

But it failed to follow through on these concerns and was too easily satisfied that they had been resolved.

From 2004 to 2007, the FSA was "not so much the dog that did not bark, as a dog barking up the wrong tree", claimed the report.

There was too much supervision at a low level and too much box-ticking, it said.

The report requires the FSA to answer nine questions about its failures. But since the FSA was abolished five days ago, on 1 April, it will not be able to do so.

Instead, its replacement, the Prudential Regulation Authority, said it would be studying the report, "to ensure that the lessons from the failings at HBOS have been fully learned".

A further report into the collapse of HBOS, started by the now disbanded FSA, will be completed by a new regulator, the Financial Conduct Authority.


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  • rate this

    Comment number 473.

    442. Colski

    "I wonder what these 3 crooks did to merit a ban?
    They must have upset the wrong people."

    Taking current levels of integrity in public life into account, I reckon they probably stopped giving donations to a major political party.

  • rate this

    Comment number 472.

    What on earth is the Archbishop of Canterbury doing as a member of the banking standards committee?

    What's he going to do, pray for their forgiveness?

    I've no respect for the BSC now I know they cant separate fact from fiction

  • Comment number 471.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 470.

    jail them all

  • rate this

    Comment number 469.

    We need much more.
    Why is HSBC not facing criminal charges?

    what has just happened in Cyprus says money is safe in NO bank, it is no longer my property I am loaning it to the bank. I don't think so.

    The need to separate depositors and savers money from the banks is urgent.
    Break them up now.

  • rate this

    Comment number 468.

    This HBOS troika need to be set an example of and not get off "Scot-free" as did Fred Goodwin (who kept his obscene pension but lost his title...oh dear, what a shame). If we don't make an example of these 3 irresponsible financial hooligans

  • rate this

    Comment number 467.

    I am unemployed because of people like this, as are many thousands in this country, and many millions around the world. They live in big houses and do not have to worry about the bedroom tax or paying their energy bills.
    They commit the crime, we do the time.

  • rate this

    Comment number 466.

    BAN???????? So if you are young and wish to embark on a life of crime, become a banker. What's wrong with criminal charges?

  • rate this

    Comment number 465.

    What is it they do in order to earn a million or more a year? Do they save lives? Care for people? Or do they do the odd bit of paper work and have the odd meeting? Are their “skills” any better than the person who fixes my car? Chances are they do very little real work and are rewarded disproportionately. If they were paid according to their value, we might have more jobs and less welfare.

  • Comment number 464.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 463.

    Meanwhile the ordinary, now redundant single citizen who has been priced out of everything, even a home, sits alone and contemplates "Tonight I think I'll walk alone, and find my soul as I go home!"

  • rate this

    Comment number 462.

    42 Minutes ago

    You can't blame these 3 men, it is obviously a failing in the system. The bonuses obviously weren't high enough to attract the best.


    So how much is enough? £5 million? £50 million? £500 million? And if we did pay this arbitary amount you seem to think they deserve and they mess up again will you still make the claim they`re not paid enough?

  • rate this

    Comment number 461.

    To those saying they should go to prison, how exactly would you do this. Natural justice says you cannot retrosepctively change the law to make someone's actions illegal. This report is a smokescreen - it pins all the blame on the bankers and FSA and completely ignores the incompetence of Gordon Brown in dismantling the regulatory regime.

  • rate this

    Comment number 460.

    "Anyone can make a mistake or two, surely these inspirational business leaders deserve a second chance?"
    Well, if that 'mistake' is murder, manslaughter, rape, arson or child abuse then that 'second chance' is questionable. Who'd have thought that ther might be some naughty people who earn a lot and are Sir, or Lord? What are the chances of that?

  • rate this

    Comment number 459.

    The question shouldn't be whether they can legally hold such a position, the question should be why is anyone hiring them! If anyone else had caused such a massive collapse of business in any other field, no one would be hiring them for anything more than making coffee. This shows the level of greed and corruption in banking; boards hiring these men should be viewed with suspicion and distrust.

  • rate this

    Comment number 458.

    Politicians lack the sense to know that you cannot re-invent economics so that everything keeps rising, and won't make changes that might lose then an election so have no long-term strategy. They relied on "hoping it would not fail".
    We are not short of bankers, so lose the ones that made the mess. Quite a few in politics should have the decency never to seek power again as they were negligent.

  • rate this

    Comment number 457.

    In answer to No 54 the Voice. Yes, people do make mistakes. However, we teach our children that mistakes carry consequences. Unfortunately, I have found through my working life, that those at the top who have made mistakes are usually rewarded with a hefty pay off and allowed to resign or retire early. What sort of example does this set?

  • rate this

    Comment number 456.

    The FSA completely took their eye off the ball. They took on the IFAs and advisers because they were big enough to bully them, but were in awe of the big banks and didn't think they could really fail. A bit like HMRC, who take Vodafone and Goldman Sachs out to lunch whilst persecuting ordinary taxpayers.

  • rate this

    Comment number 455.

    Well I won't be employing any of them in any capacity. Well possibly as a scapegoat...but they'd probably get that wrong too.

  • rate this

    Comment number 454.

    Just like the phone hacking scandal. There's a distinct lack of senior officials in handcuffs. That would seriously focus a few minds.

    It's funny how all the bankers have all suddenly become Socialist's with their demand for ever increasing amounts of public money.

    What a sad mess!


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