The parliamentary banking commission says the three bankers who presided over the 2008 HBOS collapse should never work in the City again. But why were they not stopped? And what is their punishment?
Sir James responded earlier on Friday by resigning as an adviser to private equity firm Bridgepoint, which he joined in 2006.
“Following discussion with Sir James, he has resigned from the advisory board this morning,” Bridgepoint said in a statement.
The Parliamentary Commission on Banking Standards, which includes among its members the archbishop of Canterbury, found the three bankers guilty of “catastrophic failures of management” in the run-up to the collapse of HBOS which resulted in its emergency takeover by Lloyds bank.
The influential commission of MPs and peers found that “toxic” misjudgments by the three led to the bank’s downfall. Lloyds later need a £20.5bn taxpayer bail-out at the height of the financial crisis as a direct result of its acquisition of HBOS.
The FSA’s failure to act exposes what a flawed regulatory framework was in place. Matthew Sinclair, TaxPayers’ Alliance
Former HBOS director, Peter Cummings, has been penalised by the Financial Services Authority (FSA), after being fined £500,000 and banned for life from working in the City last September.
But the commission said it was wrong that he should shoulder the blame alone, and called on the new City regulator to consider barring Sir James, Mr Hornby and Lord Stevenson from taking up any role in the financial sector.
The commission said in the report: “The primary responsibility for the downfall of HBOS should rest with Sir James Crosby, architect of the strategy that set the course for disaster, with Andy Hornby, who proved unable or unwilling to change course, and Lord Stevenson, who presided over the bank’s board from its birth to its death.”
Lord Stevenson in particular came under heavy fire from the report, having infuriated the commission by claiming reckless lending at HBOS was not his fault because he was “only there part time”.
It said he had shown himself “incapable of facing the realities of what placed the bank in jeopardy from that time until now”.
The commission said the former HBOS bosses had failed to admit their mistakes and called on them to apologise for their “incompetent and reckless board strategy”.
Sir James, who was chief executive of HBOS from 2001 to 2006 and also former deputy chairman of the FSA, is a senior independent director of catering firm Compass.
While Royal Bank of Scotland’s disgraced former boss Fred Goodwin has been stripped of his knighthood, Sir James and Lord Stevenson have retained their titles.
Matthew Sinclair, chief executive of the TaxPayers’ Alliance told Channel 4 News: “This damning report exposes a catalogue of failures by the people responsible for the collapse at HBOS that ultimately cost taxpayers a fortune.
“The FSA’s failure to act exposes what a flawed regulatory framework was in place and politicians of all parties backed the propping up of the banks with frighteningly expensive bailouts.
The HBOS story is one of catastrophic failures of management, governance and regulatory oversight. Andrew Tyrie, commission chairman
He added: “It is now clearer than ever that the claims that the bailouts were a great deal for taxpayers were absolute nonsense and policy mistakes and inept regulation bear a large measure of responsibility for the crisis.”
Mr Hornby is currently chief executive of gaming group Gala Coral, whose spokesman Simon Clare said: “He’s doing a great job and we’re delighted with the job he is doing. He has the complete backing of the business.”
Lord Stevenson has gone on to hold a number of non-executive board positions since leaving HBOS.
But the FSA, which was replaced as part of a regulatory overhaul on 1 April, was also heavily criticised for its “thoroughly inadequate” regulation of HBOS.
Andrew Tyrie, chairman of the commission, said: “The HBOS story is one of catastrophic failures of management, governance and regulatory oversight.”
He added that regulators also have “a lot of explaining to do”. “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”,” he said.
The commission confirmed that £28bn in total was injected into HBOS by the Treasury and Lloyds, which merged with the bank under a mammoth rescue, with the taxpayer still sitting on a £5bn paper loss on cash pumped into the group.
The City regulator has agreed to produce a report on the failure of HBOS and the FSA’s conduct and the commission has called on it to shed more light on a raft of management and regulatory failings in the run up to the bank’s collapse.
“The treasury committee has appointed specialist advisers whose job will be to ensure that this work is done thoroughly,” it added.