London - The banking world was rocked yesterday by a report slamming the lax past regulation of the city and demanding a far wider investigation into who was to blame for the collapse of HBOS. As many as 10 senior executives could now be banned from ever working in the city — and even barred from serving as company directors.
The Halifax and Bank of Scotland group had to be rescued by Lloyds in 2008 after running up catastrophic losses due to its reckless lending.
An investigation by the old City watchdog, the Financial Services Authority (FSA), only condemned one man, Peter Cummings, for his leading role in the bank's crisis. He was fined £500 000 and banned from working in the City.
Yesterday's long-delayed report by the QC Andrew Green into the botched investigation strongly criticises the old regulator for failing to look at the roles of other bosses in the bank's demise.
The actions of Lord Stevenson and Andy Hornby - the chairman and chief executive at the time of the collapse - are singled out as meriting further scrutiny. The FSA had been, the report says, “not reasonable” in assuming they had no questions to answer for failing to address the increasingly risky state of the bank.
Lord Stevenson is accused of having “lost the objectivity” his role required. Mr Hornby's predecessor, James Crosby - who was also a non-executive director at the FSA while running the bank - could also be investigated.
Lord Stevenson, a non-executive director of Waterstones, and Mr Crosby are no longer working in the City. Mr Hornby, however, quickly rebooted his career after the banking crisis by joining the bookmaker Coral. He is now set to become operations director when it merges with Ladbrokes.
Observers criticised the inordinate length of time taken for yesterday's report to be published - particularly as its most forceful recommendations are for yet more investigations. Lawyers for those involved insisted on being given the right to see and respond to the criticisms before publication - a legal right known as Maxwellisation after the late tycoon Robert Maxwell. A hint of potential future legal wrangling emerged last night as eight former HBOS non-executives, including Lord Stevenson, who could be investigated chose to issue their response to the report through the City law firm Ashurst.
Their statement said the report “downplays the unforeseen and unforeseeable effect of the financial crisis on HBOS” and added that it “does not contain evidence that would justify any further enforcement action against executives.”
The Ashurst clients are, as well as Lord Stevenson: Sir Ron Garrick, who ran the industrial pumps maker Weir Group at the time that it broke sanctions by trading with Saddam Hussein's Iraq; Anthony Hobson, the former finance director at Legal & General who quit as a non-executive director of eSure in May to work in California; Sir Charles Dunstone, the Carphone Warehouse founder; Coline McConville, who has multiple non-executive directorships; John Mack, known as Mack the Knife for his savage job cutting when he ran Morgan Stanley; Kate Nealon, another serial director whose non-executive roles include Cable & Wireless Communications; and Sir Brian Ivory, the Scottish tycoon whose current investments include a multimillion- pound stake in the Shawbrook challenger bank. Among Mr Green's suggestions for further investigation are “the former CEOs of the Treasury and International Divisions”. The Treasury division was headed by Lindsay Mackay, now chief executive of Alpha Bank, a London bank specialising in property loans. The international division was headed by Colin Matthew, who has retired. The HBOS finance director between September 2007 and January 2009, Mike Ellis, went on to become chair of the Skipton building society.
Benny Higgins, who headed the HBOS retail division from 2006 to August 2007, is now chief executive of Tesco Bank and Tesco Personal Finance - roles he has held since 2008.
THE INDEPENDENT