Trio who cost us £20bn may never face real justice
EIGHT years have passed since Gordon Brown’s government pumped £20billion of taxpayers’ money into Halifax Bank of Scotland to keep it afloat and protect savers from losing hardearned cash. Yet only now is the nation getting a proper account of how one of the worst disasters in British banking history was perpetrated.
The 500 pages of report took so long to produce there is little chance the main architects of this cataclysm – ex-chairman Lord Stevenson and former chief executives James Crosby and Andy Hornby – will face real justice. The statute of limitations means they and others lambasted in the report can no longer be fined.
The best that can be hoped for is that the Department of Business can use powers under company law to ban them from acting as company directors again.
For Lord Stevenson and Mr Crosby this is not much of a threat since they have largely vanished from the City.
As chief operating officer of bookies Gala Coral, Mr Hornby still holds a senior post in a major firm and is among the executives who could receive a £50million share payout if investors of Ladbrokes approve a merger of the two companies next week.
If shareholders in Lloyds Banking Group, which helped rescue HBOS in 2008, expected to learn the full, sordid details of how former prime minister Mr Brown and the then Lloyds chairman Sir Victor Blank cooked up the HBOS takeover they will be disappointed. The inquiry’s terms of reference, set by the Treasury Select Committee and in Whitehall, made no provision for this to be investigated. In the aftermath of the merger, more than 50,000 jobs were destroyed at the combined bank. Investors in Lloyds – Britain’s safest bank at the time – saw value destroyed and the dividend axed. The combined bank has so far paid out £20billion in compensation for mis-selling of payment protection insurance.
THE report by Bank of England regulator Andrew Bailey with the Financial Conduct Authority paints HBOS as a bank consumed by growth ambition. The authors also highlight a selling culture that paid little attention to the risks of obtaining funds where they could be withdrawn almost overnight – for an expansion into wholesale money markets.
In the summer of 2008, I met Lord Stevenson at a social event in London, months before the HBOS crash, and he confronted me angrily for suggesting in the Daily Mail that the funding of his bank was unsafe.
But it was not only directors and executives of HBOS who ran the bank so irresponsibly. The Blair-Brown government’s culture of ‘light touch’ regulation – when huge tax revenues from banking and the City enabled it to expand welfare spending – meant the Financial Services Authority let HBOS off the hook. When the FSA finally held a probe, after the bank failed, the regulator looked only at the commercial arm. One executive, Peter Cummings, was fined heavily.
Both the main enforcers concerned, John Tiner and his successor Sir Hector Sants, are castigated for their inattention.
Astonishingly, many of the papers which led to the disciplinary action at the time have gone missing.
The lack of serious penalties for those who brought down HBOS, and the regulators who failed to recognise it was an institution built on hype, is in contrast to the treatment of ex-trader Tom Hayes. Earlier this year, he was jailed for 14 years for rigging Libor rates.
While British enforcers claim to be almost powerless to do anything about the HBOS three and their compatriots in America, the US Justice Department is conducting a criminal probe into unnamed executives at the state-controlled Royal Bank of Scotland – over its involvement in selling rotten investment products based on subprime mortgages.
If only our own government would show the same steely determination to punish the bankers who brought misery on the country.