HBOS report puts 10 executives in line for ban

The long-awaited PRA/FCA report into the failure of HBOS has suggested that up to 10 former executives of the lender that had to be bailed out by the UK taxpayer at a cost of £25 billion at the height of the financial crisis should be banned from working in the City.

Among those named were Andy Hornby, HBOS’s former chief executive, and its former chairman, Lord Stevenson.

A separate report from the Bank of England and the Financial Conduct Authority (FCA), blamed top executives for the bank’s failure.

It was also highly critical of the former City regulator.

It said the Financial Services Authority (FSA) had been “deficient” in the way it handled HBOS.

The Institute of Directors said that the publication of shows the importance of having experienced and strong company directors around the board table.

Oliver Parry, senior corporate governance adviser at the Institute of Directors, said: “Today’s report is a timely reminder that when directors fail, companies fail. HBOS may have been swept up in a global financial crash, but the regulators are clear that a lack of expert oversight from the HBOS board made it ‘inherently vulnerable’.

“Banking regulation is much tougher now than it was in 2008, but this should not lull us into a false sense of security. Banks live and die by the strengths of the directors sat around the board table, particularly the ability of non-executives to challenge management decisions. Increased capital requirements and ring-fencing the investment arms of banks will not stop financial crises happening.

“There is justifiable anger that, so far, only one HBOS executive has been reprimanded for his involvement in its failure. The regulators have plans for further investigations and it is in everyone’s interest for these to be completed much quicker than the seven years we have waited for this one.

“But we must be careful not to confuse the roles of executive and non-executive directors. The HBOS failure makes it more clear than ever that proper independent oversight from experienced and hard-headed non-executive directors can help to prevent future crises. Making non-execs personally accountable, as the current Senior Managers Regime does, could deter the very best from taking on the role in the first instance. This would be a dangerous mistake. ”

The Bank of England/FCA report examined the failure of HBOS, while a barrister, Andrew Green QC, examined decisions taken by the FSA.

In his report, Mr Green suggests that the Bank of England’s Prudential Regulation Authority (PRA) and the FCA should consider prohibition proceedings against former executives.

This decision should be taken “as early as possible next year”, he said.

Andrew Bailey, the deputy governor of the Bank of England, promised rapid progress.

“It’s not the intention to have a lengthy investigation. We will do this piece of work as soon as possible,” he said.

Mr Hornby is now chief operating officer of Gala Coral, while Mr Ellis is chairman of Skipton Building Society and Mr Mackay is a director of Alpha Bank.

Gala defended Mr Hornby, saying he had “earned the continuing support of our colleagues, management and shareholders”.

While Lord Stevenson holds a number of positions none are in financial services and Mr Crosby is also largely retired.

Andrew Tyrie, the Conservative chairman of the Commons Treasury Committee, who this week warned that taxpayers would still be on the hook for billions in the event off another bank collapse, said that MPs would expect a decision “within months, not years”.

He also announced he would be writing to accountancy regulators, asking them to reconsider their decision not to investigate HBOS’s accountants KPMG.