Inquiry concludes

HBOS chiefs escape censure for 2008 failure

Bank of Scotland branch
Bank of Scotland became part of HBOS

Senior executives most closely connected with the collapse of HBOS in 2008 will escape fines, bans or being censured after regulators said no enforcement action would be taken.

The outcome of the six-year investigation by the Financial Conduct Authority and the Prudential Regulation Authority means neither James Crosby nor Andy Hornby – who served as chief executive of the bank – will face further personal regulatory scrutiny.

HBOS was formed by the merger of Halifax – the former building society turned bank – and Edinburgh-based Bank of Scotland.

But it was one of the highest profile casualties, alongside Northern Rock and Royal Bank of Scotland of the banking industry failure of 2007-08.

The Chancellor at the time, Alistair Darling, pulled together an initial £20bn taxpayer rescue package and HBOS was taken over by Lloyds TSB.

The new Lloyds Banking Group subsequently reported losses of £47 billion from HBOS-originated loans that were not paid and were directly linked to the competence of the HBOS management.

Regulators were criticised for not spotting the problems in the sector in years leading up to the c crash and for not taken immediate action in the aftermath of HBOS’s collapse. They were also accused of failing to follow up an eventual inquiry with any enforcement action against individuals. Under pressure from MPs, the two successors to the Financial Services Authority began a further investigation in 2016.

It considered whether or not senior managers should be subject to an order which would prohibit them from performing certain roles within the financial services industry. The FCA said yesterday that iit conducted “rigorous and forensic investigations”.

However, after processing two million documents and interviewing former HBOS managers, the regulators said there will be no further action.

A statement read: “In line with standard practice, the authorities’ independent decision-makers reviewed the matters under investigation and have each determined that no enforcement action should be taken against these former HBOS senior managers. These investigations have therefore been closed.”

The only individual to face regulatory action is Peter Cummings, the former HBOS corporate banking chief who had been the go-to banker for a string of entrepreneurial deals. He was fined £500,000 in 2012 for “a failure to exercise due skill, care and diligence”.

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Lord Tyrie, the former Treasury committee chairman who played a key role in forcing the regulators to take a fresh look at those involved in the bank’s failure, told The Times: “This will be disappointing, but scarcely surprising, to the millions of taxpayers who picked up the tab.”

One member of the current Treasury committee said it was “extraordinary” to close the investigation before the investigators had seen the result of the Dame Linda Dobbs inquiry into the handling by Lloyds of the HBOS Reading fraud.

After HBOS collapsed, Mr Crosby, now 66, deeply regretted what had happened at HBOS and voluntarily forfeited his knighthood.

Mr Hornby, 55, who had been hailed in the years before the crash as a banking wunderkind, joined Alliance Boots and then the bookmaker, bingo and casino group Gala Coral. He now chief executive of London-listed The Restaurant Group, which owns Wagamama.

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