U.K. Regulators Heap More Criticism on HBOS Bosses
November 19 2015 - 9:10AM
Dow Jones News
LONDON—British regulators on Thursday heaped more criticism on
the former bosses of HBOS PLC, the failed bank that cost the U.K.
government £ 20.5 billion ($31.2 billion) to bail out and merge
into Lloyds Banking Group PLC at the height of the financial crisis
seven years ago.
In a long-delayed report on one of the most bruising episodes in
Britain's financial history, the Prudential Regulation Authority
and Financial Conduct Authority said HBOS's lending splurge to
risky companies and property developers led to disaster when the
loan book soured and funding markets froze up in the summer of
2008. Ultimate responsibility for the failure rests with the bank's
board and senior management, they said.
They named James Crosby, chief executive of HBOS from 2001 until
2006; Andy Hornby, its last chief executive; and Dennis Stevenson,
chairman of HBOS until 2008, as among the people directly
accountable for the ill-conceived expansion effort in the lead-up
to the bailout, but stopped short of taking any fresh enforcement
action.
In 2012, regulators fined the head of HBOS's corporate division,
Peter Cummings, £ 500,000 and banned him from working in financial
services. Mr. Cummings said in a statement at the time that he
rejected the FSA's decision in its entirety but wouldn't appeal
because of costs and the strain the process would place on him and
his family.
Mr. Crosby, who had received a knighthood in 2006 for services
to the financial industry, relinquished the honor in 2013 and made
a public apology for what had happened at HBOS. Mr. Hornby and Mr.
Stevenson couldn't immediately be reached.
The report Thursday comes as agencies in the U.S. work on a
likely final wave of criminal cases related to events in the
financial crisis. In one example reported this week by The Wall
Street Journal, Federal prosecutors are actively pursuing criminal
cases against executives from Royal Bank of Scotland Group PLC and
J.P. Morgan Chase & Co. for allegedly selling flawed mortgage
securities, according to people familiar with those probes. Since
the crisis, big banks in the U.S. and in Britain have paid billions
of dollars in settlements related to precrisis era activities, but
the lack of individual fines or convictions has sparked political
controversy on both sides of the Atlantic.
In April 2013, a parliamentary commission made similar findings
to Thursday's HBOS report and said regulators should consider
banning Mr. Crosby, Mr. Stevenson and Mr. Hornby from working in
the financial sector. As part of Thursday's review, a lawyer,
Andrew Green, was commissioned to review regulators' action in the
matter.
Mr. Green said the PRA and FCA should consider banning a range
of HBOS former executives, including but not limited to Mr. Hornby
and Mr. Stevenson.
"There is plainly a public interest in this being considered
afresh," Mr. Green said. The regulators said they are reviewing the
recommendation.
Thursday's report ran to more than 400 pages and was delayed for
years by protracted legal wrangling, underscoring the U.K.'s
tortured effort to come to terms with the fallout from the
financial crisis.
HBOS was formed in 2001 when Halifax Building Society merged
with The Bank of Scotland. Mr. Cummings remains the only manager of
a failed bank to have been fined for not exercising due skill and
care.
Write to Margot Patrick at margot.patrick@wsj.com and Max
Colchester at max.colchester@wsj.com
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(END) Dow Jones Newswires
November 19, 2015 08:55 ET (13:55 GMT)
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