Cable "considering ban" for former HBOS directors following Parliamentary Commission report

In its report, the Parliamentary Commission on Banking Standards (PCBS) blamed "catastrophic failures of management" on the part of the bank's former chair, Lord Stevenson, and former chief executives Sir James Crosby and Andy Hornby for the bank's collapse. The Commission said that it was "surprised" that only Peter Cummings, another former director who headed the bank's corporate unit, had faced regulatory sanctions.

According to the BBC, Cable "feels outraged" by the lack of action against the three by then regulator the Financial Services Authority (FSA). He has told the Insolvency Service to consider whether there is sufficient evidence to begin company director disqualification proceedings against the three, it said. The PCBS has also asked regulators to consider banning them from further roles in the financial services sector.

Cummings was fined £500,000 and barred from holding a regulated post (92-page / 1MB PDF) with a bank in the future by the FSA in September.

"It is unsatisfactory that the FSA appears 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," said Andrew Tyrie, chair of the PCBS. "The Commission has therefore asked the regulator to consider whether these individuals should be barred from undertaking any future role in the sector."

"The HBOS story is one of catastrophic failures of management, governance and regulatory oversight. The sums would never have added up: the Commission has estimated that, taken together, the losses incurred by the Corporate, International and Treasury divisions would have led to insolvency, regardless of funding and liquidity problems, had HBOS not been bailed out by both Lloyds and the taxpayer," he said.

"The Commission concluded that primary responsibility for these failures should lie with the former Chairman of HBOS, Lord Stevenson, and its former Chief Executives, Sir James Crosby and Andy Hornby," he said.

The PCBS, which is made up of members from both Houses of Parliament, was set up to consider and report on professional standards in the UK banking sector following the announcement of regulatory and competition investigations into the LIBOR rate-setting process. It has also been tasked with making recommendations for future regulation and Government policy, and to provide pre-legislative scrutiny of the Banking Reform Bill.

HBOS was formed in 2001 following the merger of Halifax plc and Bank of Scotland. According to the PCBS, the new bank set a strategy for "aggressive, asset-led growth across divisions" immediately following the merger which involved "accepting more risk across all divisions". The committee said that although many of the strengths of its two founding firms remained at branch level, the strategy led to the creation of a "brash" new culture at corporate level, "coupled with a lack of corporate self-knowledge at the top of the organisation".

In addition, the regulation of HBOS by the FSA was "thoroughly inadequate", the report said. Although the regulator identified some of the issues that would eventually contribute to the collapse of the group in the years following the merger, it "failed to follow through on these concerns" and was "too easily satisfied that they had been resolved", the PCBS said.

"From 2004 up until the latter part of 2007, the FSA was 'not so much the dog that didn't bark as the dog barking up the wrong tree'," Tyrie said. "The FSA responded favourably to a Treasury Committee request for a comprehensive report, similar to that prepared on RBS, not just into the failure of HBOS but also into the FSA's own conduct. The Treasury Committee has appointed specialist advisers whose job will be to ensure that this work is done thoroughly."

HBOS was bought over by rival Lloyds Banking Group in 2008. It later received a Government bail-out worth £20.5 billion.