HBOS to face MP criticism

The parliamentary commission report will put pressure on FSA regulators to take action.

New Statesman
Photograph: Getty Images.

The management of HBOS Plc will face severe criticism from the British MPs’ when the parliamentary commission on banking standards presents its report on Thursday that found total cost of bailing out the bank grew to around £30bn.

HBOS was formed in 2001 with the merger of Halifax and Bank of Scotland.

The commission, which examined the 2008 failure of HBOS, will also present a case study of a failed bank with poor governance and weak credit risk controls.

The parliamentary commission was chaired by Tory MP Andrew Tyrie and includes MPs and peers like Lord Lawson, the former chancellor, and Justin Welby, the new Archbishop of Canterbury.

Lord Stevenson, chairman of the bank from its creation up to 2008, Sir James Crosby, who was chief executive up to early 2007, and Andy Hornby, CEO for the following two years, are set to be the main focus of the report’s criticism, reported the Financial Times.

Peter Cummings, the former corporate banker who led a rapid expansion of corporate lending, may also face criticism. He said: “It was unfair, sinister and curious that neither his bosses nor regulators themselves had been similarly castigated.”

Crosby and Mr Hornby have apologised before the commission for their roles in HBOS’s failure last year. However, Lord Stevenson expressed his horror over the affair but defended his own and the bank’s behaviour, prompting Lord Lawson to accuse him of living in cloud cuckoo land, reported FT.

The commission’s report will put pressure on the Financial Services Authority regulators who closed their investigation of HBOS in September 2012 by fining and banning Cummings, but took no action against others.

Apart from problems in the UK and Ireland, HBOS made huge losses in Australia at a time when its competitors were generating profit with minimal bad debts.

The report will also reveal that around £28bn was injected into the HBOS operation in terms of capital, including £20bn in direct government support.

Stevenson and Cummings declined to comment, while Crosby and Hornby didn’t reply to requests for comment.