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Banking panel savages FSA and calls for ex-HBOS execs to be banned

Andrew Tyrie 480

The parliamentary commission on banking standards has savaged the FSA and former HBOS senior executives over the “catastropic failure” of the bank in 2008.

In its report, An accident waiting to happen: The failure of HBOS, published today, the panel calls for ex-chairman Lord Stevenson and ex-chief executives Andy Hornby and Sir James Crosby, who was also former FSA deputy chairman, to be banned from working in financial services.

HBOS was forced to merge with Lloyds Banking Group in 2008 to avoid collapse and the Government then took a 42 per cent stake in the merged bank. Only ex-HBOS director Peter Cummings has been banned from holding a senior position in banking and fined £500,000.

The report blames its demise on “systemic management failure ” across the entire bank and said the losses incurred would have seen the bank fail even without the credit crunch. It also attacked its “higher risk, non-standard” and “excessively confident” mortgage lending.

PCBS chair Andrew Tyrie says: “It is unsatisfactory that the FSA appears 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.

“The commission has therefore asked the regulator to consider whether these individuals should be barred from undertaking any future role in the sector.”

Tyrie says more needs to be done to make those at the top of banks ‘“directly accountable” and the commission will make recommendations in its final report, set to published next month.

The report slams the FSA’s supervision as “thoroughly inadequate”. It says the FSA failed to follow through on its concerns, was too easily satisfied that they had been resolved and ignored third party reports highlighting problems.

Tyrie says: “The regulators also have a lot of explaining to do when it comes to their role earlier in the HBOS debacle. From 2004 up until the latter part of 2007, the FSA was ‘not so much the dog that didn’t bark as the dog barking up the wrong tree’.”

The FSA is currently working on a report into the bank’s collapse that is expected to be published in the summer.

A spokesman for Lloyds Banking Group says: “Lloyds Banking Group notes the publication of the PCBS’ report into HBOS. The commission’s report relates to HBOS in the years prior to its acquisition by the group. We continue to focus our efforts on rebuilding the group for the benefit of our customers, employees and shareholders.”

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Comments

There are 22 comments at the moment, we would love to hear your opinion too.

  1. It has taken nearly 5 years to produce this report and it is published just after the FSA ceases to exist and therefore cannot be held to account. Will Parliament produce a similar report about the performance of the FSA 5 years from now when the individuals concerned have all moved on retired or entrenched in well paid jobs, say like Sants. Is there not a case for at least his Knighthood being removed. He has probably done more damage than Goodwin did, at least Goodwin’s incompetence was only confined to one Bank, Sants has damaged the whole industry and the whole economy.

  2. Tony Blair took banking regulation away from the Bank of England and gave it to the FSA originally, even though they had no employees with banking qualifications! If it`s not broken then why fix it? Just like the financial advice industry.

  3. Incompetent regulators 5th April 2013 at 8:46 am

    Tyrie is correct to say this. He should say more and he knows the Fsa top execs who were responsible at the time for the oversight of banks should also be put up to scrutiny. If found guilty must also be punished, including the possibility of big fines and prison sentences. Tyrie was the author of the Leviathan at large as far back as 2000 where he points out all the Fsa flaws. Something the Fsa want to bury!

  4. Fantastic Timing of release of report FSA do not exist!
    The advice that the heads of the banks allowed to happen is the reason the mortgage market is where it is today. They have done as much damage if not MORE than Goodwin retract all monies they maid in bonuses from 2000 to 2008 and remove any titles bestowed on them as they received them in the end for damaging the entire industry.

  5. Unfortunately it would seem that the timely change of name (or did the Parliamentary Committee purposely delay the report?) has probably protected a good few who were culpable and have merely continued under their new guise. Perhaps Mr Wheatley will now be looking to root out the bad wood and we may well see some diplomatic departures over the next few months. Indeed some have already gone on to pastures new. Did they suspect the results of the committee in good time?

    Let’s put it another way – when advisers are found wanting there is a wholesale review and the good tend to suffer as much as the culpable. Too often it isn’t the adviser community that is culpable at all – but they tend to get clobbered none the less. (Key Data? Arch Cru?) So how come this treatment isn’t applicable to the regulators themselves? Why is it that the part of the financial services community that poses the least risk seems to be the most persecuted? It appears that there is one law for them and a different one for the others.

    We can only hope (from the recent promising sound bites) that the new leadership at the FCA will presage a welcome change.

  6. If the failed HBOS execs are named, shamed and it’s recommended that they don’t work in financial services again, why aren’t the failed execs at the regulator named, shamed and banned from being regulators. It is not just that one failure is treated more harshly than another.

  7. What do Stevenson, Hornby and Crosby care?
    The report is way too late, deliberately so, no doubt.
    These big wigs have their fat cat pensions and will live comfortably for the rest of their lives.
    One rule for them another for IFAs’ who would be held liable and chased for the rest of their lives, ask John Calland.
    The FSA probably assumed that Crosby, being ex FSA was so capable, he did not require any scrutiny.
    The whole thing is a sick joke.
    No one will be held to account especially the FSA.

  8. Julian Stevens 5th April 2013 at 9:56 am

    The FSA may no longer exist ~ technically ~ but many if not most of the people who used to work for it are now working in almost identical positions within the FSA Mk.II.

    At his appearance before the TSC in March 2011, Hector Sants was asked repeatedly to identify the individuals within the FSA who had been derelict in their duties to prevent the near meltdown suffered by various banks. Repeatedly he refused to do so, merely citing the failures as having been “collective”. Eventually, the Committee gave up and moved on to other things which, to my mind, demonstrates its ultimate toothlessness in the wake of persistent stonewalling from someone who was supposed to have been there to account for the failings of the organisation of which he was Chief Exec.

    That highlights the FSA’s lack of accountability and just isn’t good enough.

    The individuals should be named, shamed, censured, fined and banned from holding any future positions of responsibility in either regulation or indeed in the wider financial services community.

    The only person named was Clive Briault, for his dereliction of duty with regards to Northern Rock, and look what he got ~ a massive golden parachute and all with OPM. As for Hector Sants, look what he got ~ a knighthood and an even more highly paid job with Barclays.

    It stinks.

  9. To Little too late.
    As has already been said- wait to the FSA does not exist to issue this statement.
    A complete nonsense by Tyrie and Co. Why was this not issued last year?
    The socially elite get away with murder every time.
    Tyrie at first was seen as the champion for the cause in regards to the IFA industry against RDR. Now that the RDR has been implemented. He must take some of the blame of the destruction of our industry and the introduction of genetic advice to the working classes.

  10. Gordon Brown is the one to blame for all the shortcomings of the FSA. It was his idea to take away powers from the bank of england and hand regulation to that useless institution. The FSA or now known as the FCA is a toothless regulator!

  11. Harry the reason regulators cannot be called to account is that they are protected from being so. The argument being that no one would do the job otherwise.

    It is a flawed argument and it will be interesting to see if the FCA can be brought to account, but I personally doubt it despite what they say.

    Tyrie and co. whilst admirable have shown they have no power to do anything other than moan as we all do. They should spend more of their efforts changing the law so everyone is accountable (including regulators) otherwise it is just an expensive circus, but looks good and has gone on for too long now.

  12. “not so much the dog that didn’t bark as the dog barking up the wrong tree’.”

    Some days I feel I’m taking watching the mad hatters tea party. so frustrating – why is HMG (of any political shade) always 5 years behind events. All we need now is the inevitable “lessons will be learned” phrase trotted out yet again!

  13. Sir James Crosby, who was also former FSA deputy chairman…… If you check companies house he was a director of company number 01920623 formerly known as the FSA (no record of this on companies house company check) which is now known as the FCA. Same legal entity.
    Crown immunity for HM forces was removed some years ago so it is ironic that the FSA and it’s staff seem to be playing the “Crown Immunity” card as it willNOT wash it it gests to court one day. Corporate manslaughter anyone?

  14. The FSA was a disgusting body lacking in virtue and manned by a mix of insdustry failures, no-necks and temporary rung-climbing bureaucrats.

    The FSA selected Crosby as a non-exec director and whilst he didn’t take his non-exec directors salary his very existence on the board was a stain on this industry’s reputation.

    Why is it that successive governments continue to allow meddlers, self-servers and incapable numpties to make life-altering decisions and then wander off into the sunset with the back pockets bulging?

  15. If Tyrie & Co have no power to do anything and are unwilling or again, unable to change the situation, leaving the quango’s therefore running the country, why bother voting for any political party?
    Write to your MP and tell them why you will not be bothering to enter the ballot box.

  16. @Anonymous | 5 Apr 2013 2:06 pm not voting is NOT a solution as you get what you desreve if you don’t. If you vote and don’t get what you want, then you have a legitimate gripe.
    Just my opinion….
    I like the Ozzie way, voting is mandatory, who you vote for is NOT.

  17. But what is the point Phil, if the one you are voting for has no real power?
    Would you go to a doctor who informed you that he did not have the power to write you out a prescription?
    What would be the point? he could diagnose the problem without giving the cure.
    The whole thing is a shambles and I for one will not be voting for any party which allows an unelected, unaccountable, out of control regulator to have more power than the government of the day.
    Rant over.

  18. @ Anonymous | 5 Apr 2013 2:58 pm As my Sargeant major said when I resigned from the TA on principle in 2000 in anticipation of a war I disagreed with root and branch, having signed an oath to do somehting I disagreed with, I either had to resign or do as I was told.
    Having served with my the CSM (later to become RSM in time for the 2nd Gulf War) for about 12 years, i.e. before teh fall of the Berlin Wall, he thanked me for being willing to do what some would have seen as pointless, i.e. commit to trying to get across the channel to Germany in the event of war, quickly enough to slow down the Warsaw pact forces knowing FULL WELL we’d probably get hit with persistent nerve agent at the ports and even if we got as far as Germany (unlikely) our workshop would probably get hit by a some trigger happy american drugged up pilot of a plane (no drone, just drugs then) mistaking and Warriors we were working on for a BRDM or something similar!
    Was that a waste of time? Were the Falklands? No I don’t think so as having stood our ground we’re still standing on it in Europe and the Falklands. We ahve survived the PIA, the FSA and will probably outlive the FCA and certainly a lot of it’s staff.
    Voting is essential if we want a democracy as agreeing with Churchill, our democracy is one of the least bad options. Norman Tebbit said somehting similar at the weekend when comparing China and the UK.
    Vote for whoever has replaced Screamin Lord Such, it’s still avote as the Italian’s found out when they voted in their comedian!

  19. Time for a change 5th April 2013 at 4:09 pm

    Phil
    The problem with voting is you get what you DONT deserve. For too long the country has been run by a self serving class of career politicians and professionals whose long list of failures is well documented and seemingly never ending. The problem with our current (and very very old) system is that we are ruled by people who WANT power (dangerous in itself) rather than by the people who would be the most competent. We never get long term direction backed up by competent and imaginative planning.
    The vote every 5 yrs is itself virtually irrelevant as most of the time there is little REAL choice, plus they often disregard what they said they would do anyway. I think a combination of something akin to the current Jury Service system would serve the country much better (could it be worse?!?!) – a random choice of people to represent us and vote (REAL people!) for a fixed period – all paid according to their previous 3 yrs income avge perhaps – with the ability to co opt truly competent people to do the really impt jobs – view it as a bit like National Service ?
    Plus why cant we have mroe active regular voting using online technology thrown in as well? If security for online banking is good enough then Im sure we coudl have frequent votes on stuff that affects us.

  20. Dominic Thomas 5th April 2013 at 4:31 pm

    I’m reminded of the summer riots and various youth that nicked a few trainers and TVs that ended up in prison. There is something very wrong with justice if those that presided over and possibly created the crunch go largely unpunished, is this little more than a class / old boys issue?

  21. @ Phil
    Resign or do as you are told
    I resign. I am never voting again.

  22. I agree with Dominic Thomas and also with “Time for a change”. However for all its faults I do believe our democracy remains one of the strongest and best in the world and we change it too quckly at our peril. The House of Lords changes were not marvellous and were too quick, the increase in quangos by NULibor is undemocratic as is much of the European Union and hence why were I able to I would wind back the clock on a lot of the poorly designed legislation such as FSMA 2000 which has now been redisigned but with RDR going on, I haven’t had time to make sure I knew what was being changed in our names.
    The red terror after the destruction of the White Russian forces and the Cossacks leaving for other pastures in the 1920’s (to then be sent to death camps in the Soviet Union in 1945 for fighting against the Soviets and contrary to League of nations rules) tells us from histroy that rapid change is NOT very nice to live through as we have seen in Iraq and now in Libya and Syria.
    Thank goodness for boring old British Democracy where we get a right to vote even if we don’t get exactly what we want becuase getting agreement is like herding Katz (eh Harry)

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