View the article online at http://citywire.co.uk/money/article/a617821
Former HBOS executive banned and fined £500k
The Financial Services Authority will publish a report on the collapse of HBOS after punishing Peter Cummings, the bank's former head of corporate lending.
(Update) Former HBOS executive director Peter Cummings has been fined £500,000 by the Financial Services Authority and banned from holding any senior banking positions after the regulator ruled he was partly responsible for the near collapse of the bank in 2009.
The FSA said Cummings, who was executive director and chief executive of HBOS corporate division, failed to exercise due skill, care and diligence by pursuing an ‘aggressive expansion strategy’ within the corporate division between January 2006 and December 2008.
The high risk of HBOS corporate business was such that three quarters of its portfolio was considered to be sub-investment grade. In total it lent £68 billion to commercial property developments, making up 56% of its book, a far higher level of exposure than other banks, said the FSA.
The enforcement action ends a three-year investigation against Cummings, who waived a £1.3 million bonus when he left the bank in 2009. The regulator will now prepare a report into the causes of HBOS' failure which it will publish before it is replaced by the new Financial Conduct Authority next year.
Tracey McDermott, director of enforcement and financial crime at the FSA, said: 'Despite being aware of the weaknesses in his division and growing problems in the economy, Cummings presided over a culture of aggressive growth without the controls in place to manage the risks associated with that strategy. Instead of reacting to the worsening environment, he raised his targets as other banks pulled out of the same markets.'
Cummings angrily rejected the FSA findings, telling Reuters the decision had 'not been reached through any fair or independent judicial process'. He said he had reluctantly decided not to appeal to the FSA tribunal.
He added: 'The fact that I am the only individual from HBOS to face investigation defies comprehension.'
HBOS teetered on the brink of insolvency in 2009 as awareness of its toxic assets grew and as the credit crunch caused by the US sub-prime lending scandal intensified. Having bailed out Royal Bank of Scotland the government's response was to encourage Lloyds TSB to mount a rescue takeover although as the extent of HBOS' problems emerged Lloyds' share price collapsed and it too was forced to accept a tax payer bailout.
News sponsored by:
The Citywire guide to investment trusts
In association with Aberdeen Asset Management
More about this:
Tools from Citywire Money
From the Forums
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add email@example.com to your safe senders list so we don't get junked.