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”

End Quote

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 993.

    Oh don't get me started!
    The RTB was a long term plan to further enslave the masses into debt thus reducing or removing willingness to stand up for rights whilst suckering them in on the promise of future wealth (property price increases).
    For most, this meant a 20-25 yr debt at best. For many, it meant losing everything. Prop-price inflation benefits very few at the bottom end.

  • rate this

    Comment number 992.

    "Financial regulators should consider banning three top HBOS bankers from future roles in the financial sector, "

    Bit like suggesting that convicted murderers should be encouraged to stop going around killing people, then? Or drug barons should be asked nicely to scale back their operations, if they wouldn't mind.

    These three, and a fair few more, should be doing their jail time by now.

  • rate this

    Comment number 991.

    In 1825, after yet another Great Crash based on speculative fraud, canny Northern business baked technological change rather than slaves and sugar. And they did so, successfully, even though joint stock companies had unlimited liability for debt. Time to consign the banksters to join Mr Dorritt in the Marshalsea!

  • rate this

    Comment number 990.

    Just imagine if they updated 'Monopoly'

    Go straight to jail,do not pass Go, do not collect £200

    "But..I'm a banker!"

    .......Ah! Ok then, play on Sir!

  • rate this

    Comment number 989.

    No 57 They shouldn't be allowed a second chance, I worked for HBOS for over 20 years, and lost about 15k in shares due to the incompetence of these three

  • rate this

    Comment number 988.

    anyone else in any other job would have lost their job for such monumental mistakes ... we have to be thankful that they weren't doctors

  • rate this

    Comment number 987.

    Crosby, Hornby, Stevenson, Goodwin

    The real wrecker scroungers are at last named & blamed.

    The truth is out !!

    It is not poor people on benefits who are the scroungers as Duncan Smith and Osbourne would have us believe. It is really the Tory City cronies who have ruined the economy & because of their greedy stealing and scrounging

    The question now is what will be their punishment ??

  • Comment number 986.

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

  • rate this

    Comment number 985.

    The financial service should know when it acts dishonestly in pursuit of profit, but this stressed by their risk of takeover or merger. To mix comission based 'sales' departments with new customer only 'marketing / advertising' has only one outcome.
    Yes - introduce a financial licence, you score points and bans.
    Banks use to be respected, trusted, and needed.

  • rate this

    Comment number 984.

    Only holding those at the top to account is a cop out. Banks are made up of many thousands of people, some who are not team players irrespective as to who is at the top. These people whose attitudes and actions undermine the business need to be weeded out as well. Only then will we start to see higher standards.

  • rate this

    Comment number 983.

    Why are financial sector 'professionals' not subject to similar codes of conduct and professional standards that any other professionals are? Doctors, engineers, architects, solicitors, nurses, etc. are all subject to standards or levels of conduct where non compliance or other negligence can lead to them being 'struck off'! About time we saw real liability for anyone guilty of abject negligence!

  • rate this

    Comment number 982.

    These people have been obviously unfit since their bank went bust. Why do we have to wait until someone writes a report? This should have been thrashed out in No 1 Court at the Old Bailey a couple of years ago.

    Why is it that nobody has a yet been made criminally responsible for the massive theft inflicted on the British people in the autumn of 2008?

    This is quite intolerable.

  • rate this

    Comment number 981.

    Yes indeed - the silence from Osbourn is deafening - yet he feels compelled to lend support to the Daily Mail's irresponsible propaganda.

    We should forget about Trident - we've got enough multiple warhead "Talent" Bombs in the Square Mile to destroy the world three times over.

  • rate this

    Comment number 980.

    So those people aren't in jail, and they got rehired despite failure

    I see the principles of capitalism in action. If you fail then no one will hire you, right?

  • rate this

    Comment number 979.

    //933. Acet

    - Look at the strong defense of City Banks by the like of Cameron, Osborne and Boris Johnson.//

    and remember Labour were in power, they knighted Goodwin. MidStaffs and Entwistle examples of public sector and the left being no better than these bankers.

    They're all in it together. The rest of us just pay and put up with it.

  • rate this

    Comment number 978.


    Finance is the biggest tax evading sector in the UK.

    A report by Washington-based International Consortium of Investigative Journalists, details "complex offshore structures" used by wealthy people from all over the world, including government officials and their families. It has major media coverage in Germany and France.

    The story is carried by the Guardian and suppressed in UK.

  • rate this

    Comment number 977.

    What a shocking report. These talented people clearly need to have massive rewards showered upon them: bonuses, shares, massive salaries, pensions etc as well as knighthoods. Otherwise they might leave the country and work for other banks elsewhere in the world who can then use their incredible talents to their advantage.

  • rate this

    Comment number 976.

    957.plumserve I get your irony.
    TBH you don't go far enough.
    We should petition CofEx to introduce a new Bank Directors Tax rate of -50% so the remaining UK taxpayers can send a clear message we really really love them & want them to continue their plan of taking all assets from UK business & individuals.
    After all, they'll need the extra money to set up abroad once they've bled us dry.

  • rate this

    Comment number 975.

    The Government treat top financiers as if they were created in a lab!
    maybe im on to something?

  • rate this

    Comment number 974.

    These roasters are clearly unfit to run a raffle, never mind a bank.


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