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HBOS senior managers could face ban over bank’s failings

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  • 19/11/2015
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HBOS senior managers could face ban over bank’s failings
A report published by the City regulators has recommended that former senior managers at disgraced bank HBOS should face a ban from working in the financial services sector.

In the report, The failure of HBOS plc, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA), named former chairman Lord Stevenson, and chief executives James Crosby and Andy Hornby as key players in the bank’s wrongdoing. It added that anyone else presiding over a similar failure in future should also face a ban.

HBOS, previously the UK’s largest mortgage lender, was acquired by Lloyds Banking Group in 2009 after it experienced plummeting profits in the build up to the 2008 financial crisis.

The FCA confirmed earlier this week that former senior bosses at the collapsed lender would escape fines, with the regulator powerless to pass on any fines due to the time taken to complete the investigation, which was launched in 2012.

In its review, the regulators concluded that the ultimate responsibility for the failure of HBOS rests with the board and senior management.

It said: “They failed to set an appropriate strategy for the firm’s business and failed to challenge a flawed business model which placed inappropriate reliance on continuous growth without due regard to risks involved.

“In addition, flaws in the FSA’s [Financial Services Authority] supervisory approach meant it did not appreciate the full extent of the risks HBOS was running and was not in a position to intervene before it was too late.”

So far the only HBOS banker to have been penalised is Peter Cummings, who was fined £500,000 in 2012 and handed a lifetime ban from working in the City.

In a separate report drafted by Andrew Green QC, he noted that seeking to ban a senior manager at a large firm on grounds that they lack competence and capability was likely to be ‘particularly challenging’. The report also revealed that a former FSA employee has admitted that ‘the people most culpable were let off’ from any enforcement action during the decision-making process.

Andrew Bailey, deputy governor of the Bank of England and CEO of the PRA, said: “The story of the failure of HBOS is important both to provide a record of an event which required a major contribution by the public purse, and because it is a story of the failure of a bank that did not undertake complicated activity or so-called racy investment banking. HBOS was at root a simple bank that nonetheless managed to create a big problem.”

The PRA and FCA will conclude a review as to whether further enforcement action should be taken as early as possible next year.

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