Why bash the HBOS three?

Sir James Crosby, Andy Hornby and chairman Lord Dennis Stevenson Sir James Crosby and Andy Hornby, with Lord Stevenson (centre)

It is perhaps a bit odd that lords and MPs on the banking standards commission have chosen to chastise and publicly humiliate two former chief executives of HBOS and the erstwhile chairman - and to ask the regulator whether the three of them should be banned from working in the City.

To be clear, it is not the fact of censure that is odd. It is the timing, and that it's just these three rather than the great gang of bosses of failed British banks.

One relevant point is that the colossal losses generated by HBOS from its reckless lending have been public knowledge for four years.

It is true that the commission has tried to supply a bit more granular detail on the hideous red ink spilled by this owner of Halifax and Bank of Scotland.

It estimates that HBOS's aggregate pre-tax losses between 2008 and 2011 - for most of which it was owned by Lloyds - totalled £30bn, as a result of impairments on loans and investments of a staggering £50bn.

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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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And it calculates that on a proportionate basis, HBOS's losses on loans were twice that even of Royal Bank of Scotland.

As I understand it, the accused former HBOS directors - Sir James Crosby, Andy Hornby and Lord Stevenson - feel these numbers may be an over-statement.

That said, the chairman of the commission, Andrew Tyrie, told me that all these calculations had been passed to the Financial Services Authority, which - he says - indicated they were in the right ballpark.

Also, Messrs Crosby, Hornby and Stevenson would presumably not dispute that HBOS would have gone bust had it not received a massive bailout from the taxpayer and been merged with Lloyds.

And although they are not commenting in public, the scale of the losses generated in two of HBOS's divisions, corporate and international, represent a special kind of incompetence - or at least that charge from the MPs and lords is the hardest for the accused HBOS troika to bat away.

In international, HBOS's Irish and Australian banks were particularly duff, and the bank's strategy of trying to become a leading player in Ireland and Australia looks especially ill-advised. The commission estimates that losses on Irish loans between 2008-11 were £10.9bn, representing a write-off of more than a third of the value of Irish loans. The Australian write-offs were 28% of loans, or £3.6bn.

And in corporate, HBOS was what the Americans would call the "go to bank" for property and high risk companies wanting to load up on debt. The commission estimates loan impairments in this division were £25bn between 2008-11, rather more than the total GDP of Cyprus.

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If the HBOS troika are to be blacklisted from the City, why not ban those who ran the other failed banks?”

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This was not harmless and victimless incompetence, some would say, but a tragedy for the British people and economy.

HBOS, created by the merger of Halifax and Bank of Scotland in 2001, hoped to become a powerful new competitive force in British banking, offering superior prices and services to households and businesses.

But its collapse and rescue by Lloyds actually led to greater concentration in the banking market, and was therefore anti-competitive - and the wounded Lloyds has been struggling to provide the credit needed for British economic recovery.

That said, a large degree of what went wrong at HBOS was - to coin the phrase - systemic. This was a global banking crisis, and banks all over the world with big exposure to property - banks in Ireland, Spain, the US and elsewhere - incurred life-threatening losses.

But not all banks and lenders had to be propped up by taxpayers. In the UK, for example, Nationwide and HSBC weathered the storm, because their foundations were stronger.

Probably the single biggest error at HBOS, exposed by standards commission, was that those who tried to control risk-taking at the centre of the bank did not have the mandate or power to rein in over-exuberant divisional bosses.

All that said, there is a potential danger in this attempt by parliamentarians at ritual blood-letting so many years after the great crash of 2007-8.

Had the punishments been meted out in 2009 or so, there might have been a great national sense of justice having been done. And then morale in the banking industry - not unimportant to our prosperity - could have been rebuilt.

Here's the thing: if the HBOS troika are to be blacklisted from the City, why not ban those who ran the other failed banks, RBS, Bradford & Bingley and Northern Rock?

And if a new season of banker-bashing has been opened, is that the important catharsis that will allow reconciliation between people and banks, or an economically damaging postponement of the rehabilitation of this vital industry?

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 38.

    #36; I was modded for making exactly the same point. You are quite correct. The real losers were the Lloyds shareholders, who owned the only sound UK bank. I will try my last question again. Why are financial journalists like Mr Peston not even asking questions about what led up to the Lloyds takeover of HBOS?

  • rate this

    Comment number 37.

    Why these three? Pour encourager les autres?

    Why now? Just in case anyone is tempted to participate in the burgeoning US sub-prime auto-loan market?

  • rate this

    Comment number 36.

    Whilst HBOS was a disaster lets not forget how brown pushed Daniels into the take over without taking due care and they were clearly unaware of how bad HBOS really was. The result was Lloyds TSB being sucked into the situation with the shareholders and staff losing out and continue to do so. Brown deregulated the financial services in the 1990s and allowed much of what occurred yet he crawled away

  • rate this

    Comment number 35.

    Well it's a case of scapegoating and diversion like the vitriol that is poured out in the press against the unemployed, and underprivileged (whether in money or work), bankers are at least deserving having destroyed democracy and ushered in the fascist future.

  • Comment number 34.

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

  • rate this

    Comment number 33.

    Jail irresponsible bankers and seize their assets.

  • rate this

    Comment number 32.

    Why are we using the word "bash" here? Makes it sound like a school yard scrap by bullies. Is that the idea paint these 3 guys as poor victims? The title you use is "Why bash the HBOS three?". Why not? All (all not just these 3) these guys that drove this should be dealt with - jail is almost too good for them

  • rate this

    Comment number 31.

    Where there is exposure of loveless, selfish, and dishonouring intent and conduct, there is the old trick of scapegoat, blame, vengeance and sacrifice. All of which work to protect against a true exposure in our culture - that is - in our own mentality, and thus deny correction that actually heals, in exchange for a sort of temporary feel-good gratification that lends itself to manipulative intent

  • rate this

    Comment number 30.

    It always strikes me as odd that the HBOS and Halifax name is never used when talking about the Lloyds Banking Group problems. Afterall all it was the dubious takeover of HBOS by Lloyds that started Lloyds problems. It is as if the HBOS marketing team go out of there way to keep the Halifax /HBOS name pure. Nothing is further from the truth - I talk as an ex employee!

  • rate this

    Comment number 29.

    "a special kind of incompetence"

    That one statement say it all......... still these people live a life of luxury. If the man in the street behaved like these people he'd be out on his ear with nowt to show for it ! Take the rewards gained off them, simple

  • rate this

    Comment number 28.

    Crosby was cheerfully admitting his incompetence in front of Tyrie's committee only last year.

    And why not be cheerful, he is ALREADY TAKING his pension of £750k a year

    Tthe amazing disparity between the approaches taken by UK and US authorities means that after five years here, nobody is in jail.

    The taxpayer takes the hit. Financial services is exposed as an expensive - catastrophic - luxury

  • rate this

    Comment number 27.

    I was in the industry when these charlatans were head of BOS. They were the talk of the market , as they took risks that no other bank would take. Heads would shake as you lost deals to them at rates that would have made a considerable loss for yourself. They strutted around with the arrogance of self delusion. It permeated all the way down through the retail divisions as well. Good riddance!!

  • rate this

    Comment number 26.

    Hopefully this is just the start of a long list of bankers that will be stopped from holding power over the nations finances.

    This kind of irresponsible management should be dealt with robustly.

    Their ill gotten gains should also be recovered.

  • rate this

    Comment number 25.

    The reason why Robert Peston is so much gentler is because Dennis Stevenson was the Chairman of Pearson while Peston was making his name at the FT. Pearson owns the FT. I also suspect Stevenson was a source of many of Peston's stories, before and during the banking crisis. They are mates.

  • rate this

    Comment number 24.

    Should be prosecuted, fined and put in jail, The problems they have caused thousands of people and the country as a whole are incalculable.

  • rate this

    Comment number 23.

    No doubt that Hornby was a top of Harvard high flyer and got a top retail position at 32. But he was way out of his depth to pursue a wholesale strategy in banking. His appointment and promotion has to be a potential root cause. He's still Group CEO at major firms - Coral, the bookies being one of them. Perhaps HBOS was one gamble that didn't pay off eh?

  • rate this

    Comment number 22.

    The real crime is not letting the banks go bust as in Cyprus.

    We now face 30 years of stagnation, real waste.

  • rate this

    Comment number 21.

    You could also have mentioned that the "wounded" Lloyds has had to make around 40,000 people redundant , which has a continuing knock on affect to those involved , the economy from their changed circumstances , and the state now paying them benefits.

  • rate this

    Comment number 20.

    Its good to bring them to account, BUT, this slow drip feed of investigations and punishments is frustrating. Will we still be dealing with this in 2016 or 2017 as the slow wheels of our investigative machinery trundles on. Can they please get on with it. Bring this all out now, name, shame, fine, ban and punish...and then let's all move on...please.

  • rate this

    Comment number 19.

    @9 - you're wrong about them loving money because if they did they wouldn't have taken the horrendous risks they did. What they love far more than money is power and prestige. The need and crave that praise from their "equals" so I suspect being hung out to dry by the rest of the industry is about as bad as it gets for their egos. Now, for the rest of the ego maniacal scumbags....


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