Firms back the HBOS bankers
As 600-page report blasts 10 former executives
JOHN Griffith-Jones, the chairman of the Financial Conduct Authority, was last night facing fresh calls to resign as full details of the collapse of HBOS emerged.
The growing pressure on one of the UK’s most senior regulators came as long-awaited reports into the downfall of the High Street giant sent ripples across the business world.
Some of the former executives criticised over HBOS’s demise are currently in senior positions at major firms including bookmaker Gala Coral, Tesco Bank, and Skipton Building Society.
Two explosive reports were published yesterday: the Bank of England and the Financial Conduct Authority examined why HBOS collapsed and who was to blame, while barrister Andrew Green lambasted the decision by regulators to punish just one former executive – Peter Cummings.
Up to ten former HBOS executives, including Andy Hornby and Lord Stevenson, could face enforcement action following recommendations from Green’s damning report which could result in them being banned from working in the financial services industry for life.
But despite withering criticism of executives for pursuing their ‘flawed and unbalanced strategy’, the world of business closed ranks on those involved.
Hornby, who was HBOS’s chief executive, is now chief operating officer of betting firm Gala Coral and will take on the same role at the newly enlarged Ladbrokes Coral if the companies merge.
A Ladbrokes statement described Hornby as a ‘highly regarded operator’, adding: ‘Our position has not changed and we look forward to working with him’.
HBOS’s former group finance director Mike Ellis is now chairman of Skipton Building Society, which said he ‘has ‘the wholehearted confidence of the board’.
Benny Higgins, previously chief executive of HBOS’s retail arm, is now boss of Tesco Bank. In total seven former HBOS executives or board members still hold senior UK finance roles.
Tim Bush from shareholder group Pirc, said: ‘It is shocking and extraordinary that these people are still in the system.’
But Griffith-Jones, chairman of the City watchdog, has also found himself under increased scrutiny. He was chairman of KPMG while it signed off HBOS’s accounts, grossly underestimating the potential losses from bad loans that would later cripple the bank.
Yesterday, the Financial Reporting Council, which regulates accountants, reiterated its view that there was not enough evidence to investigate KPMG. But Andrew Tyrie MP, chairman of the influential Treasury Committee, said the FRC should reconsider. He said: ‘They will need to consider afresh their original conclusion that there were no grounds for an investigation of KPMG, relevant senior KPMG people, and relevant senior HBOS management.’
HBOS whistleblower Paul Moore, who was the bank’s former head of group risk, said: ‘KPMG are up to their necks in it.
‘They audited HBOS, the Co-Op, Bradford & Bingley – more disastrous audits than you can swing a cat at. The buck stops at the top. John Griffith-Jones should never have been appointed as chairman of the FCA in the first place. He’s got to go.’
Andrew Green lambasted the FSA for failing to investigate a string of former executives, including Hornby and former chairman Lord Stevenson.
This is a damning indictment of the FSA’s former chief executive Sir Hector Sants and its former enforcement boss Margaret Cole.
Sants is now a partner of management consultant Oliver Wyman, while Cole is the top legal adviser for accountancy firm PWC.
Chancellor George Osborne yesterday stressed that both the former executives of HBOS and regulators were to blame for its downfall in 2008.
He said: ‘This report, from one of our most respected regulators, clearly shows that the collapse of HBOS was caused by those running the bank and those regulating it.
‘It demonstrates that the system of regulation created by the last Labour government failed. In the end, this led to a £20billion bailout of Lloyds Banking Group, funded by the taxpayer.’
Others who could attract scrutiny are former HBOS chairman Dennis Stevenson and Lindsay Mackay, the former chief executive of HBOS’s treasury division, who is now chief executive of the London office of Greek bank Alpha Bank London.
Law firm Ashurst said Stevenson and seven other former non-executive directors of HBOS disagreed with a number of the report’s conclusions, saying that they downplay the unforeseen impact of the financial crisis on HBOS and did not contain evidence that would justify enforcement action.
A KPMG spokesman said: ‘We welcome the FRC’s announcement that it has reviewed the audit work performed on loan loss provisions and concluded that there were not reasonable grounds to suspect misconduct by KPMG.’
‘These people are still in the system’
‘This led to a £20billion bailout’