By Matt Scuffham
London - A former chairman of HBOS told British lawmakers that the bank had increased its corporate lending too aggressively in the run up to the financial crisis of 2008, contributing to its near collapse.
Dennis Stevenson, who served as HBOS chairman between 2001 and 2009, said in written evidence to the banking standards commission that the bank was lending too much money to businesses, leaving it vulnerable when wholesale funding markets dried up.
“It is clear, with the benefit of hindsight, that mistakes were made in the degree of corporate lending ... The Financial Services Authority is almost certainly right to suggest that the corporate division grew too quickly,” he said in evidence published before his appearance on Tuesday in front of the commission looking into the downfall of HBOS and what lessons can be learnt to prevent future bank failures.
Stevenson later told the parliamentary commission that the bank's demise was fundamentally caused by the near closure of wholesale funding markets in 2008.
He said that the bank had taken steps to broaden the nature of its funding and accelerate the rate of its deposit growth to address long-term concerns about its reliance on wholesale markets, but it had not foreseen a short-term risk.
“We failed, along with rest of the world, to anticipate the protracted closure of wholesale markets,” Stevenson said.
“The worries we had were long-term worries. Had we thought for a moment there would be protracted closure of wholesale markets, we'd have been forced to take action.”
Once Britain's biggest mortgage provider, HBOS had to be rescued by rival Lloyds Banking Group and propped up with an 11.5 billion pound ($18.5 billion) taxpayer bailout when the financial crisis laid bare its disastrous exposure to property in Britain and Ireland. - Reuters