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.”