Could the HBOS three finally get an official slap on the wrist for losing £54 billion, forcing the Government to rescue the bank and impoverishing millions of bank employees and small shareholders?
Those with long memories will remember that HBOS collapsed at the end of 2008. We waited in vain for the Financial Services Authority to report on why the bank went bust and why it, as the regulator, had failed to spot the appalling failures in basic banking which led to it. That job was left to a parliamentary commission which had been set up for a different purpose, but decided that the HBOS scandal was far too big to ignore.
Its report, “An Accident Waiting to Happen,” appeared 15 months ago and was the verdict the FSA should have produced. Comprehensive, decisive and damning, it criticised the regulatory failings, but squarely laid the blame at the door of the three men at the top of the bank — Lord Stevenson, the chairman, and two chief executives, James Crosby and Andy Hornby.
The FSA was abolished in April, without producing its report, but its successor, the Financial Conduct Authority, in partnership with the Bank of England’s Prudential Regulatory Authority has decided to finish the job — but, no rush, all it has done is publish terms of reference. According to the BBC it could be the end of the year — six years after the collapse — before we get the final verdict.
The FCA attributes part of the delay to the need to complete “enforcement proceedings,” although it admits these ended in September 2012 when Peter Cummings, who had been head of corporate banking, was fined £500,000 and banned from financial services for life. That decision provoked astonishment. No-one, not even Cummings himself, argued that he was blameless — his division lost £26 billion. But he was not in command and to allow his bosses to escape censure defies belief. Yet they have so far faced no sanctions.
Regulators – toothless in the face of the rich and determined
The FCA also explains that the report had to wait for the completion of “maxwellisation.” This process, named after the notorious crook Robert Maxwell, has rendered regulators toothless in the face of the rich and determined. In 1969 two inspectors from the Department of Trade & Industry produced a report which described Maxwell as “unfit to hold the stewardship of a public company.” Maxwell sued and the judge found in his favour, leaving him free to go on defrauding creditors and pensioners for years.
Since then anyone named in a regulatory report has been shown the relevant passage in advance, giving them and their lawyers the opportunity to argue for watering down or even removal of any criticism.
The FCA will look at some of the recommendations made by the parliamentary commission, including the banning of some former HBOS directors from working in financial services. That would be merely symbolic in the case of Stevenson, Crosby and Hornby. That the first two men went on to work for financial companies after the HBOS debacle with no comment from the regulator was a gross failure of supervision. But they have since resigned and Hornby works for a betting firm.
However, Mike Ellis, HBOS finance director, is chairman of the Skipton Building Society. It will be interesting to see if the FCA makes any comment about that.
Justice delayed, as the old saying has it, is justice denied. Harsh words against those who caused the failure of HBOS are the best that the two million small shareholders who lost most of their investment and the 40,000 employees who lost their jobs can hope for.