Former HBOS execs blamed for bank’s failure

A REPORT  into the collapse of the High Street bank HBOS says regulators should consider banning up to 10 former executives from working in the City as it said the lender had taken too much risk and had been over-exposed to the property market.

Among those potentially facing retrospective actions are former HBOS cheof excecutive Andy Hornby, and  chairman, Lord Stevenson.

The Bank of England and Financial Conduct Authority (FCA) report blames top executives for the bank’s failure. It is also critical of the former regulator, the Financial Services Authority (FSA).

The main thrust of the 400 page report – which took three years to compile – concludes that responsibility for the failure of HBOS “rests with the board and senior management”.

The lender collapsed in 2008, and was subsequently taken over by the Lloyds Banking Group. More than £20bn of taxpayers money was then used to rescue it.

The report says that HBOS tried to increase its profits by moving towards “more risky propositions”.

 Among the reasons it failed were:

•An excessive focus on market share, and short-term profitability

•An over-exposure to property, at the height of the economic cycle

•A culture which failed to balance risk and return

•A failure by the board to challenge executive managers

The report says that HBOS’s non-executive directors “lacked sufficient experience and knowledge of banking”.
As a result, risk was not a priority for the board. This was compounded, it said, by a lack of banking experience among top executives.

In a parallel report, Andrew Green QC suggests that the Prudential Regulation Authority (PRA) and the FCA should consider prohibition proceedings against former executives.

Andrew Bailey, the deputy governor of the Bank of England, promised rapid progress. “It’s not the intention to have a lengthy investigation. We will do this piece of work as soon as possible,” he said.

So far the only person to have been banned is Peter Cummings, who was previously the head of corporate lending at HBOS. In 2012 he was fined £500,000, and banned from senior positions in banking.

Other executives blamed include Mike Ellis, the former group finance director at HBOS and now chairman of the Skipton Building Society; Lindsay Mackay, the head of HBOS’s Treasury division, who is currently a director of Alpha Bank.