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Hornby and Stevenson in firing line

Former HBOS executives could face ban

Bank of ScotlandSenior executives who ran HBOS at the time of its collapse could face being banned from holding office.

In two reports into the failure of HBOS, the Bank of England, the Financial Conduct Authority and the Prudential Regulation Authority are being urged to consider acting against up to 10 of the senior management.

They include Andy Hornby, HBOS’s chief executive at the time of the collapse. He is currently chief operating officer at Gala Coral and expected to take up a senior role in the company’s merger with Ladbrokes.

Criticism was also aimed at the chairman at the time, Lord Stevenson and the now-defunct regulator the Financial Services Authority which is described in one report as being “stretched to breaking point.”

The FSA is accused of failing to investigate other directors including Mike Ellis, former finance director (currently chairman of Skipton Building Society), Colin Matthew, ex-head of the international division and Lindsay Mackay, former boss of the treasury division.

However, any enforcement action could take up to two years to implement and the authorities are unable to impose fines because of the reports have been published beyond the six year statute of limitations.

The authors say there was

An excessive focus on market share, and short-term profitability

An over-exposure to property, at the height of the economic cycle

A culture which failed to balance risk and return

A failure by the board to challenge executive managers

A lack of sufficient experience and knowledge of banking among the non-executive directors

Andrew Tyrie, chairman of the Treasury select committee, said regulators should decide on bans “within months, not years”, and that the role of HBOS’s auditor KPMG required further investigation.

HBOS – which was formed in the 2001 merger of Halifax and Bank of Scotland – had to be rescued in late 2008 via a government-engineered takeover by rival Lloyds, which subsequently needed a £20 billion bailout to survive.

The government, which took a 43% stake in the bank, has since managed to sell most of its shares and expects it to be fully back in private hands by next year.

 

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