One down, two to go: Former HBoS chief executive quits new job after damning report demands trio of former directors be BANNED from the City. So what about the other two?
The banking boss blamed for 'setting
the course for disaster' at HBoS which left the taxpayer with a
£25billion bill today quit his top job advising a major private equity
firm after a
damning report demanded he be banned from working in the City forever.
Sir James Crosby dramatically resigned from Bridgepoint, just hours after he faced criticism of his lead role in the collapse of the bank in a report by the Parliamentary Commission on Banking Standards.
The report claimed Sir James must take 'primary responsibility' for the collapse, along with former chairman Lord Stevenson and fellow chief executive Andy Hornby.
Critics called for Lord Stevenson and Sir James to be stripped of their honours, after former Royal Bank of Scotland chief executive Fred Goodwin was relieved of his knighthood last year.
Prime Minister David Cameron sought to pin the blame for the fincancial crisis on the last Labour government. He said: ;We've changed the entire regulatory system. We've swept away the failed system that Gordon Brown had put in place. A new regulatory system is now there and is now working and will make sure that these things can't happen again.'
More than four years since HBoS had to be rescued by Lloyds and a massive government bailout, the ‘reckless’ bankers at the top were slated by the official report into the debacle.
They faced calls for a lifetime ban on working in the City after their ‘catastrophic failures’ saddled taxpayers with a £28billion bill.
The commission said in the report: 'The primary responsibility for the downfall of HBOS should rest with Sir James Crosby, architect of the strategy that set the course for disaster, with Andy Hornby, who proved unable or unwilling to change course, and Lord Stevenson, who presided over the bank's board from its birth to its death.'
Sir James was chief executive of HBOS from 2001 to 2006 and is also a former deputy chairman of the Financial Services Authority.
He was a member of the European Advisory Board at Bridgepoint, although his salary was not made public, and is also a senior independent director of catering firm Compass where he earns £125,000.
A spokesman for Bridgepoint said: 'Following a discussion with Sir James this morning he has decided to resign from the advisory board.'
Meanwhile Compass, one of the country's largest catering companies, refused to back Sir James, with a spokesman refusing to comment on his future.
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Banking giant HBoS was formed by the
merger in 2001 of Halifax and Bank of Scotland, becoming one of the
country's biggest lenders.
After the collapse of Lehman Brothers in 2008 it was caught up in the global financial crisis, and was taken rescued by Lloyds TSB, by-passing competition law to prevent a repeat of the demise of Northern Rock.
But the vast bank required £20.5billion taxpayer bailout at the height of the financial crisis.
The Commission blamed the three men's 'toxic' misjudgments for the bank's downfall and said they should not be allowed to work in the financial sector again.
But Mr Hornby's current employers, Gala Coral, are standing by him. Simon Clare, a Coral spokesman, said: 'Coral as a business is performing extremely well and that coincides with Andy's tenure as chief executive.
'He's doing a great job and we're delighted with the job he is doing. He has the complete backing of the business.'
The Government’s Commission on Banking Standards examined the roles played by former HBoS chairman Lord Stevenson and former chief executives Sir James Crosby and Andy Hornby, and its damning report today accuses them of presiding over a lending spree which led to the bank’s downfall at the height of the financial crisis in 2008.
Like Northern Rock, HBoS – created in 2001 by a merger of Halifax and Bank of Scotland – fell to the brink of collapse after relying on risky short-term loans from other banks to fuel its own lending to customers.
When banks became too scared to lend to each other during the financial crisis in 2008, HBoS – saddled with £238billion of debt – had to be rescued by Lloyds.
All three men at the top of the company have moved on to lucrative positions since leaving HBoS, but the commission found their actions so ‘deluded’ it has called on the City watchdog to consider banning them from working in the financial sector ever again.
It also singled out former chairman Lord Stevenson as being ‘incapable of facing up to the reality of what placed the bank in jeopardy’.
In its devastating report, the Commission says:
'They need to be stripped of their knighthoods and peerages.’
He added: ‘We’ve got here very rich people with great power who have not been held to account – finally someone from the establishment has taken off their gloves and is telling it how it is.’
The City watchdog, the Financial Services Authority, is also slammed by the Commission for ‘box ticking’ and failing to prevent the collapse of HBoS, despite warning the lender’s board in 2004 that it was ‘an accident waiting to happen’.
It says: ‘The FSA was ‘not so much the dog that didn’t bark as the dog barking up the wrong tree.’
But as the blame game escalated today, former Labour treasury minister Lord Myners took aim at Gordon Brown, claiming the former PM who gave him a job in government 'got it wrong' on opposing tougher rules in the City.
Lord Myners, a former NatWest executive brought appointed City Minister by Mr Brown in 2008, praised the 'brilliant' and 'forensic' report but said politicians made a mistake in opposing stricter regulation of the industry.
Lord Myners said: 'I wasn't in the government at the time, but I probably was part of a consensus that missed what was happening.
'Gordon Brown was wrong in what he said; his judgement has proven to be wrong, and I’ll put my hand up and say that I was with the consensus in thinking that the City was doing probably quite a good job,' he told BBC Radio 5Live.
'I had been on the court of the Bank of England at that time and had been urging the Governor to look at the issues of risk and poor risk management. But I think Gordon Brown got it wrong.'
Shareholders, including pension savers, have seen their investments wiped out, while more than 35,000 staff at Lloyds and HBoS have lost their jobs since the bailout in 2008.
Britain's biggest insurance boss
scooped £7.8million in pay and share rewards last year after getting a
generous pay rise despite being criticised by the City regulator.
Prudential chief executive Tidjane Thiam was slammed last week for his handling of a botched mega-deal in 2010 which cost shareholders more than £400million.
He is the only serving chief executive of a FTSE 100 company ever to be censured by the Financial Services Authority.
But last night, only days after the humiliating rebuke, the company revealed soaring pay packages for its top executives – including a 66 per cent rise in Mr Thiam’s package.
Total rewards given to the company’s board rose 12 per cent to £35.2million. During the year, Mr Thiam received basic pay of £1million as well as a £2million bonus.
He also collected £250,000 in pension payments, and received benefits worth £123,000 which include a car and health cover.
The lion’s shares of his package came from lucrative share awards worth £4.4million, which will pay out to him in the coming months because of his performance last year.
During 2011 his package came to £4.7million. He faced calls to resign in 2010 after leading the company into a failed merger with Asian rival AIA.
Talks over the £21billion deal were so secretive that even the regulator was not told of the plans. The FSA only found out about the deal when it was leaked to the media.
Last week it slammed Prudential, saying it did not deal with the watchdog ‘in an open or co-operative manner’.
It also hit the firm with a £30million fine, taking the total cost to shareholders of the debacle to more than £400million.
The company last year posted annual pre-tax profits of £2.8billion, an increase of 54 per cent. The shares have risen almost 40 per cent in the past 12 months.
Andrew Tyrie MP, chairman of the Commission, describes ‘the history of HBoS as a manual of bad banking’.
He added: ‘Consumers and the wider economy, as well as shareholders and taxpayers, have paid a heavy price for the blunders of the HBoS board.'
He refused to say whether he would like to see Sir James or Lord Stevenson lose their titles, saying the public were not concerned about knighthoods.
'That is not our jobs, we were not set up as a Banking Commission to strip people of their titles,' he told BBC Radio 4's Today programme.
'I don't think the public are so concerned about knighthoods, what they want is reassurance that they won't get hit by this again, that people who do such damage are identified and are prevented from practising and that people should not be allowed to gamble with our money and then walk away with huge bonuses.'
In its 90-page report, the commission catalogues the ‘toxic’ and ‘incompetent’ decisions made by the management at HBoS.
The report added: ‘We are shocked and surprised that even after the ship has run aground, so many of those who were on the bridge still seem so keen to congratulate themselves on their navigational skills.’
The Commission criticises the regulator for only punishing former director Peter Cummings.
Known as the banker to the stars, Cummings headed the corporate division which dished out huge loans. He was fined £500,000 last year and received a lifetime ban from working in the City.
The FSA has this week been replaced by two new watchdogs, the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority.
A spokesman said: ‘The Government has done away with the discredited system that failed to sound the alarm as the financial system went wrong, and put in its place a new system that puts the Bank of England back in charge.’
Former HBoS chairman Lord Stevenson
is accused by the Banking Commission of being ‘delusional’ and
‘incapable of facing the realities of what placed the bank in jeopardy’.
A series of telling exchanges between the 67-year-old peer – who is a friend of Lord Mandelson – and the City watchdog shortly after the run on Northern Rock in September 2007, are highlighted in the Commission’s report.
When asked how HBoS was coping with the crisis on November 13, 2007, Stevenson insisted that the management team had scaled-back its high-risk behaviour.
‘Without wishing to sound hubristic, management has done a superb job-a-job (sic) that started five years ago…’, he said.
Stevenson also accuses the Financial Services Authority of being ‘paranoid’ about the health of HBoS, adding on March 17, 2008, just months before the lender’s collapse: ‘My soberly considered view is that given the extraordinary external environment, HBoS in an admittedly uncertain and worrying world is in as secure a position as it could be.’
The Cambridge-educated peer, who once described himself as ‘an unreconstructed 1960s Guardian-reading liberal’ and an ‘intellectual snob’, received £815,000 in annual pay and perks at HBoS.
But despite this, in December he stunned the Commission by claiming he only worked there part time and was not responsible for its risky lending. Commission member and former chancellor Lord Lawson accused him of ‘living in cloud cuckoo land’.
Despite Stevenson’s attempts to portray himself as a fringe player in the downfall of HBoS, the Commission points out he was at the helm from ‘its birth to its death.’
The keen violinist became chairman of Halifax in 1999 and assumed the top role two years later when it merged with Bank of Scotland.
Since leaving HBoS after it was rescued by Lloyds, Stevenson has worked for a private equity firm and he recently quit as a non-executive directorship of a venture capital firm based in tax haven Guernsey.
Sir James Crosby dramatically resigned from Bridgepoint, just hours after he faced criticism of his lead role in the collapse of the bank in a report by the Parliamentary Commission on Banking Standards.
The report claimed Sir James must take 'primary responsibility' for the collapse, along with former chairman Lord Stevenson and fellow chief executive Andy Hornby.
Critics called for Lord Stevenson and Sir James to be stripped of their honours, after former Royal Bank of Scotland chief executive Fred Goodwin was relieved of his knighthood last year.
Prime Minister David Cameron sought to pin the blame for the fincancial crisis on the last Labour government. He said: ;We've changed the entire regulatory system. We've swept away the failed system that Gordon Brown had put in place. A new regulatory system is now there and is now working and will make sure that these things can't happen again.'
More than four years since HBoS had to be rescued by Lloyds and a massive government bailout, the ‘reckless’ bankers at the top were slated by the official report into the debacle.
They faced calls for a lifetime ban on working in the City after their ‘catastrophic failures’ saddled taxpayers with a £28billion bill.
The commission said in the report: 'The primary responsibility for the downfall of HBOS should rest with Sir James Crosby, architect of the strategy that set the course for disaster, with Andy Hornby, who proved unable or unwilling to change course, and Lord Stevenson, who presided over the bank's board from its birth to its death.'
Sir James was chief executive of HBOS from 2001 to 2006 and is also a former deputy chairman of the Financial Services Authority.
He was a member of the European Advisory Board at Bridgepoint, although his salary was not made public, and is also a senior independent director of catering firm Compass where he earns £125,000.
A spokesman for Bridgepoint said: 'Following a discussion with Sir James this morning he has decided to resign from the advisory board.'
Meanwhile Compass, one of the country's largest catering companies, refused to back Sir James, with a spokesman refusing to comment on his future.
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The report also condemned the role played by
former HBoS chief executive Andy Hornby (left) and ex-chairman Lord
Stevenson in the collapse of the bank
After the collapse of Lehman Brothers in 2008 it was caught up in the global financial crisis, and was taken rescued by Lloyds TSB, by-passing competition law to prevent a repeat of the demise of Northern Rock.
But the vast bank required £20.5billion taxpayer bailout at the height of the financial crisis.
The Commission blamed the three men's 'toxic' misjudgments for the bank's downfall and said they should not be allowed to work in the financial sector again.
But Mr Hornby's current employers, Gala Coral, are standing by him. Simon Clare, a Coral spokesman, said: 'Coral as a business is performing extremely well and that coincides with Andy's tenure as chief executive.
REWARD FOR FAILURE: HOW HBOS BOSSES CASHED IN AFTER SLUMP
Despite
being at the helm of HBoS as careered towards the rocks, the former
captains of the banking giant went on to lucrative new jobs.
LORD STEVENSON
A keen violinist, having once been a member of the National Youth Orchestra, he earned £815,000 as chairman of HBoS.
As a non-executive director of the global money transfer service Western Union, he earned more than £500,000 between 2008 and 2011 and he picked up £35,000 last year on the board of Economist Group.
Until last year he was also a non-executive director of venture capital firm Loudwater, based in tax haven Guernsey.
Another of his consultancy firms is called Cloaca Maxima (named after the Latin phrase for ‘great sewer’).
SIR JAMES CROSBY
The 57-year-old earned the rare distinction of being the first leading banker to fall on his sword, quitting his role as an advisor to private equity firm Bridgepoint.
However the former chief executive of HBoS, accused of setting the course for the disaster which would follow, also earns £125,000 as a non-executive for catering firm Compass.
In 2009 he became chairman of software firm Misys, and receives an annual pension of £572,000 from HBoS, despite calls for him to forfeit some of it.
Unlike Fred Goodwin, who lost his knighthood for his role in RBS's downfall, Sir James's honour has remained unscathed.
ANDY HORNBY
A former boss at supermarket Asda, Mr Hornby was chief executive of Halifax when it merged with Bank of Scotland and was the head of HBoS when the banking crash hit.
But he remains very much in demand, earning a reported £500,000-a-year as chief executive of bookmakers Coral.
After leaving HBoS he earned up to £2.1million as chief executive of Alliance Boots, receiving £2.4m when leaving in 2011. He has a £2.4m pension pot from HBOS.
LORD STEVENSON
A keen violinist, having once been a member of the National Youth Orchestra, he earned £815,000 as chairman of HBoS.
As a non-executive director of the global money transfer service Western Union, he earned more than £500,000 between 2008 and 2011 and he picked up £35,000 last year on the board of Economist Group.
Until last year he was also a non-executive director of venture capital firm Loudwater, based in tax haven Guernsey.
Another of his consultancy firms is called Cloaca Maxima (named after the Latin phrase for ‘great sewer’).
SIR JAMES CROSBY
The 57-year-old earned the rare distinction of being the first leading banker to fall on his sword, quitting his role as an advisor to private equity firm Bridgepoint.
However the former chief executive of HBoS, accused of setting the course for the disaster which would follow, also earns £125,000 as a non-executive for catering firm Compass.
In 2009 he became chairman of software firm Misys, and receives an annual pension of £572,000 from HBoS, despite calls for him to forfeit some of it.
Unlike Fred Goodwin, who lost his knighthood for his role in RBS's downfall, Sir James's honour has remained unscathed.
ANDY HORNBY
A former boss at supermarket Asda, Mr Hornby was chief executive of Halifax when it merged with Bank of Scotland and was the head of HBoS when the banking crash hit.
But he remains very much in demand, earning a reported £500,000-a-year as chief executive of bookmakers Coral.
After leaving HBoS he earned up to £2.1million as chief executive of Alliance Boots, receiving £2.4m when leaving in 2011. He has a £2.4m pension pot from HBOS.
The Government’s Commission on Banking Standards examined the roles played by former HBoS chairman Lord Stevenson and former chief executives Sir James Crosby and Andy Hornby, and its damning report today accuses them of presiding over a lending spree which led to the bank’s downfall at the height of the financial crisis in 2008.
Like Northern Rock, HBoS – created in 2001 by a merger of Halifax and Bank of Scotland – fell to the brink of collapse after relying on risky short-term loans from other banks to fuel its own lending to customers.
When banks became too scared to lend to each other during the financial crisis in 2008, HBoS – saddled with £238billion of debt – had to be rescued by Lloyds.
All three men at the top of the company have moved on to lucrative positions since leaving HBoS, but the commission found their actions so ‘deluded’ it has called on the City watchdog to consider banning them from working in the financial sector ever again.
It also singled out former chairman Lord Stevenson as being ‘incapable of facing up to the reality of what placed the bank in jeopardy’.
In its devastating report, the Commission says:
- The former bosses’ ‘high risk’ strategy led to the collapse of HBoS
- ‘Reckless lending’ by HBoS culminated in £46billion losses for Lloyds between 2008 and 2011
- Former bosses were ‘deluded’ and had failed to take responsibility for their actions
- The regulator should consider banning them from working in financial sector
- The City watchdog was warned in 2004 that HBoS was an ‘accident waiting to happen’
'They need to be stripped of their knighthoods and peerages.’
He added: ‘We’ve got here very rich people with great power who have not been held to account – finally someone from the establishment has taken off their gloves and is telling it how it is.’
The City watchdog, the Financial Services Authority, is also slammed by the Commission for ‘box ticking’ and failing to prevent the collapse of HBoS, despite warning the lender’s board in 2004 that it was ‘an accident waiting to happen’.
It says: ‘The FSA was ‘not so much the dog that didn’t bark as the dog barking up the wrong tree.’
But as the blame game escalated today, former Labour treasury minister Lord Myners took aim at Gordon Brown, claiming the former PM who gave him a job in government 'got it wrong' on opposing tougher rules in the City.
Lord Myners, a former NatWest executive brought appointed City Minister by Mr Brown in 2008, praised the 'brilliant' and 'forensic' report but said politicians made a mistake in opposing stricter regulation of the industry.
Lord Myners said: 'I wasn't in the government at the time, but I probably was part of a consensus that missed what was happening.
'Gordon Brown was wrong in what he said; his judgement has proven to be wrong, and I’ll put my hand up and say that I was with the consensus in thinking that the City was doing probably quite a good job,' he told BBC Radio 5Live.
'I had been on the court of the Bank of England at that time and had been urging the Governor to look at the issues of risk and poor risk management. But I think Gordon Brown got it wrong.'
Shareholders, including pension savers, have seen their investments wiped out, while more than 35,000 staff at Lloyds and HBoS have lost their jobs since the bailout in 2008.
Bailed out: During the financial crisis in 2008, HBoS ¿ saddled with £238billion of debt ¿ had to be rescued by Lloyds
UNDER FIRE PRU CHIEF'S 66% RISE
Faced calls to resign: Tidjane Thiam
Prudential chief executive Tidjane Thiam was slammed last week for his handling of a botched mega-deal in 2010 which cost shareholders more than £400million.
He is the only serving chief executive of a FTSE 100 company ever to be censured by the Financial Services Authority.
But last night, only days after the humiliating rebuke, the company revealed soaring pay packages for its top executives – including a 66 per cent rise in Mr Thiam’s package.
Total rewards given to the company’s board rose 12 per cent to £35.2million. During the year, Mr Thiam received basic pay of £1million as well as a £2million bonus.
He also collected £250,000 in pension payments, and received benefits worth £123,000 which include a car and health cover.
The lion’s shares of his package came from lucrative share awards worth £4.4million, which will pay out to him in the coming months because of his performance last year.
During 2011 his package came to £4.7million. He faced calls to resign in 2010 after leading the company into a failed merger with Asian rival AIA.
Talks over the £21billion deal were so secretive that even the regulator was not told of the plans. The FSA only found out about the deal when it was leaked to the media.
Last week it slammed Prudential, saying it did not deal with the watchdog ‘in an open or co-operative manner’.
It also hit the firm with a £30million fine, taking the total cost to shareholders of the debacle to more than £400million.
The company last year posted annual pre-tax profits of £2.8billion, an increase of 54 per cent. The shares have risen almost 40 per cent in the past 12 months.
He added: ‘Consumers and the wider economy, as well as shareholders and taxpayers, have paid a heavy price for the blunders of the HBoS board.'
He refused to say whether he would like to see Sir James or Lord Stevenson lose their titles, saying the public were not concerned about knighthoods.
'That is not our jobs, we were not set up as a Banking Commission to strip people of their titles,' he told BBC Radio 4's Today programme.
'I don't think the public are so concerned about knighthoods, what they want is reassurance that they won't get hit by this again, that people who do such damage are identified and are prevented from practising and that people should not be allowed to gamble with our money and then walk away with huge bonuses.'
In its 90-page report, the commission catalogues the ‘toxic’ and ‘incompetent’ decisions made by the management at HBoS.
The report added: ‘We are shocked and surprised that even after the ship has run aground, so many of those who were on the bridge still seem so keen to congratulate themselves on their navigational skills.’
Known as the banker to the stars, Cummings headed the corporate division which dished out huge loans. He was fined £500,000 last year and received a lifetime ban from working in the City.
The FSA has this week been replaced by two new watchdogs, the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority.
A spokesman said: ‘The Government has done away with the discredited system that failed to sound the alarm as the financial system went wrong, and put in its place a new system that puts the Bank of England back in charge.’
MANDELSON'S FRIEND WHO REFUSED TO FACE REALITY
Lord Stevenson
A series of telling exchanges between the 67-year-old peer – who is a friend of Lord Mandelson – and the City watchdog shortly after the run on Northern Rock in September 2007, are highlighted in the Commission’s report.
When asked how HBoS was coping with the crisis on November 13, 2007, Stevenson insisted that the management team had scaled-back its high-risk behaviour.
‘Without wishing to sound hubristic, management has done a superb job-a-job (sic) that started five years ago…’, he said.
Stevenson also accuses the Financial Services Authority of being ‘paranoid’ about the health of HBoS, adding on March 17, 2008, just months before the lender’s collapse: ‘My soberly considered view is that given the extraordinary external environment, HBoS in an admittedly uncertain and worrying world is in as secure a position as it could be.’
The Cambridge-educated peer, who once described himself as ‘an unreconstructed 1960s Guardian-reading liberal’ and an ‘intellectual snob’, received £815,000 in annual pay and perks at HBoS.
But despite this, in December he stunned the Commission by claiming he only worked there part time and was not responsible for its risky lending. Commission member and former chancellor Lord Lawson accused him of ‘living in cloud cuckoo land’.
Despite Stevenson’s attempts to portray himself as a fringe player in the downfall of HBoS, the Commission points out he was at the helm from ‘its birth to its death.’
The keen violinist became chairman of Halifax in 1999 and assumed the top role two years later when it merged with Bank of Scotland.
Since leaving HBoS after it was rescued by Lloyds, Stevenson has worked for a private equity firm and he recently quit as a non-executive directorship of a venture capital firm based in tax haven Guernsey.