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 1013.

    @1010 Manny

    Couldn't agree more !!

    This is just typical of the way things work in notice I don't say Great Britain !! because up to now no government as given me reason to associate the word Great with Britain.

    As my dear mother used to say "They all p*** in the same pot" and they all deserve to be locked up !!

  • rate this

    Comment number 1012.

    Total silence from Osbourne & Duncan Smith? This should shut them up & because the truth is out!

    Surprise, surprise! It is the City of London scroungers who have so wrecked the economy & not work shy benefit claimants after all?

    And all Tories to a man?

    So where is the punishment?? Or are these scrounging elite so protected by Osbourne & Cameron that nothing will happen to them?

  • Comment number 1011.

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

  • rate this

    Comment number 1010.

    These so called leaders of the banking community do not care what we have to say & will not change. They have gained privilege and status through bad decisions & management at our expense and all this debate will not change that fact. Unlike the normal hard working members of society, they are probably laughing all the way to the bank from their walled and gated mansions paid for by the taxpayer

  • rate this

    Comment number 1009.

    I work in the City, and I am disgusted by some of the lunchtime conversation that I have to sit through.

    "London is immune to recession"

    "I've just bought another flat and rented it out for a stupid (expensive) amount of money"


    The over-priced housed market was engineered by the banks, a known policy presided over by these 3 clowns and many others, and is killing the economy.

    Sack 'em!

  • rate this

    Comment number 1008.

    #998. the voice

    The risk every small businessman takes is that of doing right or the customer wont pay.

  • rate this

    Comment number 1007.

    You ask a very big question, the problem is significant sections of London's financial district, accounting, legal, political and bureaucracy are up to their armpits in it. The last thing they want is criminal convictions and enquiries as the whole house of cards would come down. A cost the UK could probably not withstand.

  • rate this

    Comment number 1006.

    995 good luck. it has struck me that they have not been prosecuted about they were as they have ruined many lives and caused suicides!

  • rate this

    Comment number 1005.

    978 ~ Tax evasion is destroyinf our country because it is widespread. There was a problem at the BBC recently brought to light. What did not illuminate was Marcus Agius of Barclay's Bank fame then serving as non-executive director in the BBC's Executive Board together with Charlotte Hogg.

    Scammers and skimming is the great sport. Let the sick demise. Let the children urchin. Tax evaders = ***

  • rate this

    Comment number 1004.

    As a measure of good will these three executives should dedicate the rest of their working lives to the NHS on a voluntary basis.
    Can you imagine, Poker games on the recovery wards, Roulette fridays in the cafeteria and cine race nights in the A and E department!

  • rate this

    Comment number 1003.

    In much the same way that the Tories are the party of the NHS - because Dave told us that very earnestly - they are also the party of law and order - we know that because they took immediate and disproportionately severe action against blue collar looters.

    Some might call them liars and duplicitous hypocrites with double standards

    Me? I just say.....same old Tories.

  • rate this

    Comment number 1002.

    I thought the infallible "free market", which determines that bankers should get astronomical wages and people like teachers and nurses only peanuts, was supposed to select the very best candidates for these kinds of top positions.

    Or have we been living in a fantasy world promoted by the very people who stand to make the most out of it?

  • rate this

    Comment number 1001.

    Crosby, Hornby & Stevenson are just the tip of a very big iceberg. If they had been further down in the pecking order they would have been jailed in some countries, vide Leeson et al. Those who offend against society in such a massive way should not be just subject to mild strictures & restrictions as to their future activities, but just like drug dealers & the like their assets should be forfeit.

  • rate this

    Comment number 1000.

    The HBOS report says much about the Labour Party's so-called 'light touch regime' of City regulation in the period this unfolded. No wonder the FSA didn't do their job properly, Mr Brown's Treasury had taken the decision to change their remit. In addition to the HBOS 3 it would be useful to see the Treasury and Government ministers named and shamed. Somehow a forlorn hope.

  • rate this

    Comment number 999.

    I took over a management post for a week, and completely tanked the company.

    I got sacked, obviously. But I asked for a year's salary anyway, as that seems to be the norm nowadays.

    The reply I got was really very, very, rude.

  • rate this

    Comment number 998.

    All this hatred towards the 3 is unfounded. OK they took risks with other people's money for their own profit, but hey that's capitalism for you. I don't see everybody who has had a pop at them on here handing money back when their share dividend comes in or pay more in shops as competition keeps prices down. Face it, everybody's nose is in the trough, some just been a bit deeper than others.

  • rate this

    Comment number 997.

    It is assumed that these brilliant people should get massive rewards (100% bonus is not enough) for success. They should also receive fines for their failures. Fine the bosses not the companies. Don't worry. George Osborne won't do this. "It is better that a low-paid working man lose their job and become homeless than that a rich man lose any of the wealth or properties lthat he has earned."

  • rate this

    Comment number 996.

    591: "Finance is the biggest single tax paying sector in the UK"

    And if it wasn't, something else would be.

    So your point is what, exactly?

  • rate this

    Comment number 995.

    I am surprised that any responsible appointments board would even consider them for another position.

    Having lost my job due to the mess they & politicians have made, I have heard enough spurious excuses for why I haven't got job after job that I've tried for - and I've not c!Ked things up. Oh well, anther interview next Wednesday, wish me luck.

  • rate this

    Comment number 994.

    Never mind the banks - Like most people I pay 50% of my income to the government, and in return I have had 15 years+ of criminal levels of incompetence, yet those directly responsible are waiting in the wings to resume power at the next election. If you want so see an alignment with responsibility and accountability then start with Brown, Balls etc. Far greater mismanagemnt than the banks.


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