‘Everyone remembers the names of Applegarth of Northern Rock and Goodwin of RBS, but history may judge the HBOS men to have been the worst of the lot,’ I wrote four years ago. Judgment has arrived at last in a Bank of England report on the 2008 HBOS collapse — plus a second report, by Andrew Green QC, on the adequacy of investigations by the now-defunct Financial Services Authority.
The Bank does not go as far as I did with ‘worst of the lot’. But there’s a hint that way in deputy governor Andrew Bailey’s foreword, which calls this ‘a story of the failure of a bank that did not undertake complicated activity or so-called racy investment banking: HBOS was at root a simple bank…’ By that he means a bank built, both in the former Halifax building society and in the Bank of Scotland, on age-old principles of prudent lending against bricks and mortar.
HBOS didn’t go bust doing new things, but doing old things recklessly. The Bank’s report says executives embarked on ‘rapid and uncontrolled growth’ based on ‘over-exposure to highly cyclical commercial real estate at the peak of the economic cycle [and] lower-quality lending’. HBOS’s board, chaired by grand non-banker Lord Stevenson, failed to challenge this crazy course, which was also insufficiently tested by the FSA — whose decision afterwards to pursue action against only one executive (corporate lending chief Peter Cummings, who was fined £500,000 for ‘misconduct’) was, says Green, ‘materially flawed’.
There’s a whiff of Chilcot here, in the sense that the time taken to publish these reports has been extended by ‘Maxwellisation’ — allowing those mentioned to comment on drafts — and it would now be too late to impose fines on anyone else.
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