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As I See It

Will the bankers ever be forgiven for failure?

 

Terry Murden

Is it time to stop banker bashing?

Chris van der Kuyl, the Dundee-based businessman who has experienced his share of setbacks and got back on his feet, told a recent gathering of young technology start-ups: “Do not fear failure, but if you are going to fail, do it fast and do it cheaply.”

It is a mantra that he and his peers have been reciting for years because fear of failure is one of the biggest reasons why individuals hold back from starting a business.

Yet there is an ambivalence towards failure. Start-ups are encouraged to believe they will not be stigmatised, even if they leave behind a trail of unhappy creditors. Big business leaders, on the other hand, are not allowed to fail.

Setting aside any criminal or fraudulent reasons for failure – Enron, Bernie Madoff – which are clearly inexcusable, many leaders of big businesses are permanently tainted when their empires collapse. What is it they say? The higher they rise, the harder they fall. This is most evident in our continuing demonising of bankers.

Of course they have much to answer for, having wrecked shareholder value, jobs and reputations through a combination of incompetence, reckless disregard towards risk and the customer, and an ignorance of what certain miscreants were doing on their watch, and in their name.

It has emerged this weekend that one of those at the fulcrum of the crisis, Andy Hornby, chief executive of HBOS at the time of its collapse, could be in line for a windfall and a return to the listed company sector if Ladbrokes merges with Gala Coral.

Mr Hornby, now chief executive of Coral Retail, is understood to be one of about 50 senior figures at Gala Coral who hold a combined stake of about 10% in the company. If the merger of the two bookmakers goes ahead it may mark Mr Hornby’s first senior role at a listed company since he was ousted from HBOS in 2008.

The news has re-opened hostilities towards the bankers with a clear implication behind some of the ‘disgraced banker’ headlines that he is not allowed to get his life back.

Unlike Fred Goodwin, his Edinburgh-based counterpart at Royal Bank of Scotland, Mr Hornby has enjoyed a measure of rehabilitation tempered by an association with failure on the grand scale. Soon after losing his job at HBOS he took the helm at Alliance Boots, only to resign suddenly two years later and eventually resurface at Coral.

He has kept a low profile, helped by being involved with the less-scrutinised private sector. Those close to him say he took the collapse of HBOS badly and personally. He was, after all, a young man in his thirties when he was plucked from Asda and described as banking’s wunderkind. His star was still rising just as the banking sector was heading into its worst crisis in a century.

To what extent, though, was he culpable in what went wrong? He has to share some of the blame. He led the bank into a reckless mortgage war with Northern Rock and did not keep its corporate loans in check, leaving Peter Cummings to line the pockets of property and retail tycoons.

It has to be said that those same tycoons were happy to take the money to build their own reckless ambitions, as were mortgage applicants who accepted 120% loan-to-value deals at the height of the housing boom. The industry worldwide was a train wreck about to happen and no one at the top had either the guts or the foresight to jump off. From Lehman Bros to the Dunfermline Building Society, lenders went off the rails, and so the repercussions began.

The history of what went wrong has been well told, not least by Scottish journalists Ian Fraser and Iain Martin, but few have stopped to question whether fundamentally good men were the victims, as much as the causes, of the crash.

There will be more to come, not least from the HBOS report  – when it is eventually published. However, they didn’t screw up because they turned bad, but because they were over-ambitious, got caught up in the lust for growth and power, and had a different fear of failure: one that would show them as weak and unable to stand up to the advisers, investors and other stakeholders who were happy to egg them on, and made themselves scarce when the pack of cards came crashing down.



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