At a Treasury select committee hearing, Hornby said he had heeded the advice of risk managers who pointed at HBOS’s heavy reliance on the wholesale market to fund an expanding mortgage book.
He said: “I became the chief executive in September 2006 and the set of actions that were taken in the next 18 months tried to minimise our risk position. The first thing we did was to stop share-buyback promos, I was extremely keen that we pulled back and went cap in hand back to shareholders. I also pulled back further on our mortgage share, which fell from 14 per cent net lending in 2007 to 8 per cent in 2008. We also recognised the wholesale markets were getting a lot more difficult and we had already considerably extended the longevity of our wholesale funding.”
Labour MP George Mudie said: “You are all in denial, don’t equivocate, accept it, you had a flawed model that was applauded when it made a lot of grass, then it turned out to be dodgy when mark- ets changed.”
Hornby said: “With hindsight, we would have done more. I am extremely sorry.”
Former Edeus chief exec- utive Michael Bolton, who previously ran HBOS’s BM Solutions, says: “Hornby motivated his teams to sell products, coming from Asda with a stack ’em high, sell ’em cheap’ mentality. That’s fine, but the board forgot it was running a risk-based business. This approach just isn’t sustainable in financial services, selling a mortgage isn’t like selling a tin of beans.”