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| Version 1 | Version 2 |
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| HBOS collapse: Ex-bosses face calls for City bans | HBOS collapse: Ex-bosses face calls for City bans |
| (about 2 hours later) | |
| The Banking Standards Commission has asked the Financial Services Authority (FSA) to consider if three top HBOS bankers should be barred from future roles in the financial sector. | The Banking Standards Commission has asked the Financial Services Authority (FSA) to consider if three top HBOS bankers should be barred from future roles in the financial sector. |
| It said former bosses Sir James Crosby and Andy Hornby were largely to blame for the collapse of HBOS, then the UK's fifth biggest bank, in 2008. | It said former bosses Sir James Crosby and Andy Hornby were largely to blame for the collapse of HBOS, then the UK's fifth biggest bank, in 2008. |
| Former chairman Lord Stevenson was also heavily criticised. | Former chairman Lord Stevenson was also heavily criticised. |
| The commission accused the trio of a "colossal failure" of management. | The commission accused the trio of a "colossal failure" of management. |
| 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. | |
| City regulator the FSA also came in for criticism, with the commission saying it was "unsatisfactory" that 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". | City regulator the FSA also came in for criticism, with the commission saying it was "unsatisfactory" that 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". |
| HBOS is now part of Lloyds Banking Group, which stressed that the relevant events happened before it owned HBOS. | HBOS is now part of Lloyds Banking Group, which 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. | "We continue to focus our efforts on rebuilding the Group for the benefit of our customers, employees and shareholders," its spokesperson said. |
| Lloyds Banking group is currently 39% owned by the tax-payer. | Lloyds Banking group is currently 39% owned by the tax-payer. |
| The commission accused the bank of "reckless" lending policies that resulted in losses of £46bn. | 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. | Such losses would have led to insolvency had the bank not been bailed out by the taxpayer and Lloyds TSB, the commission claimed. |
| The report, called "An Accident Waiting to Happen" said that £20.5bn of public money went into the rescue of HBOS before and after its merger with Lloyds. | The report, called "An Accident Waiting to Happen" said that £20.5bn of public money went into the rescue of HBOS before and after its merger with Lloyds. |
| 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 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. | "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." | "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. | 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. |
| 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. | 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. | 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. | 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. | 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. | "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 | Flawed strategy |
| The report said the strategy set by the board after 2001 "sowed the seeds of its destruction." | 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, to form HBOS. | That was the year in which the Halifax and the Bank of Scotland agreed to merge, to form HBOS. |
| It was too aggressive in accepting more risk across all its divisions, and it indulged in "reckless lending" that lost it a total of £46bn. | It was too aggressive in accepting more risk across all its divisions, and it indulged in "reckless lending" that lost it a total of £46bn. |
| That included losses of £25bn in its corporate division, and £14.5bn in Australia and Ireland. | That 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. | 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. | 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. | 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 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." | "This was a traditional bank failure pure and simple. It was a case of a bank pursuing traditional banking activities and pursuing them badly." |
| Failure of Regulation | Failure of Regulation |
| The commission said that the FSA's regulation of HBOS was "thoroughly inadequate." | The commission said that 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. | 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. | 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. | 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 low level, and too much box-ticking, it said. | There was too much supervision at low level, and too much box-ticking, it said. |
| The report requires the FSA to answer nine questions about its failures. | 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. | 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". | 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". |
| It will publish a further report into the collapse of HBOS in several months time. | It will publish a further report into the collapse of HBOS in several months time. |
| The report was started by the FSA, but was never published. | The report was started by the FSA, but was never published. |