British financial regulators will look into barring up to 10 executives linked to the 2008 collapse of the country’s biggest mortgage lender, HBOS, some of whom still hold senior business roles.
The Bank of England (BoE) and the Financial Conduct Authority (FCA) blamed HBOS’s management for its failure and criticised the previous regulator, the Financial Services Authority (FSA).
Andy Hornby, who has since become chief operating officer at gambling company Gala Coral, the lawyer behind one of the reports said:“The (BoE’s) Prudential Regulation Authority and the FCA will conclude a review as to whether further enforcement action should be taken as early as possible next year,” the central bank said in response.
The bailout of Lloyds and its rival, Royal Bank of Scotland, caused Britain’s public debt to balloon, prompted lasting public outrage at bankers, and triggered a revamp of British financial regulation.
The regulators’ report reached similar conclusions to one by lawmakers in 2013, and BoE deputy governor Andrew Bailey said it highlighted the need for regulators to resist political pressure for light-touch bank regulation.
“HBOS was at root a simple bank that nonetheless managed to create a big problem,” Bailey said.
Reckless lending in Britain, Ireland and Australia, particularly in commercial real estate, as well as reliance on insecure sources of financial market funding were behind HBOS’s collapse.
Others who might be considered for action by the BoE and the FCA include former HBOS chairman Dennis Stevenson – a member of Britain’s upper house of parliament – and the former chief executive of HBOS’s treasury division, Lindsay Mackay.
Regulators cannot impose criminal penalties but could formally bar former HBOS staff from ever working in Britain’s financial services industry.
In total, seven former HBOS executives or board members still hold senior finance roles. To date, only the head of HBOS’s corporate lending division, Peter Cummings, has ever faced a formal sanction as a result of the bank’s collapse, though Hornby did give up a knighthood.
After the bailouts of Lloyds and RBS, the FSA was scrapped, its powers were given to the BoE and the newly created FCA, and reckless management of a bank became a criminal offence.