Regulators to rule on HBOS bosses

• 19 November 2015
• From the section Business

The Bank of England’s regulators are to rule on whether former HBOS bosses will be banned from working in the City.

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) issue their report on the bank’s 2008 collapse on Thursday.

The bank was rescued by Lloyds TSB, which itself had to be bailed out by the Government to the tune of £20bn.

In 2013 Banking Standards Commission chair Andrew Tyrie said there had been “a colossal failure of leadership.

The Commission said the regulators should look at whether two former chief executives, Sir James Crosby and Andy Hornby, and its former chairman, Lord Stevenson “should be prohibited from holding a position at any regulated entity in the financial sector”.

The report will also look at the reasons behind HBOS’ failure, and its supervision by the previous regulator, the Financial Services Authority (FSA).

Criticised

The FSA was criticised in the Banking Standards Commission report which said that the watchdog appeared “to have taken no steps to establish whether the former leaders of HBOS are fit and proper persons to hold the approved persons status elsewhere in the UK financial sector”.

One director has already been punished: the former head of wholesale banking, Peter Cummings, was fined £500,000 and banned from working in senior financial roles by the FSA.

The FSA was abolished on 1 April 2013 and replaced by the PRA and the FCA.

HBOS’s collapse followed the demise of Lehman’s in September 2008 as the credit crunch – the flow of cash in the wholesale markets – began to take hold.

It was then rescued by Lloyds TSB.

However the scale of HBOS’s problems meant the enlarged bank itself had to be bailed out by the Government in return for a 41% equity stake.

Lloyds has since been forced to retrench and cut tens of thousands of jobs. Much of the government’s stake has been sold back to the public, taking the total raised for the taxpayer to £15.5bn and reducing the government’s shareholding to below 11%.