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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.

 
Former HBOS executive banned and fined £500k

(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.

19 comments so far. Why not have your say?

James Watts

Sep 12, 2012 at 18:02

I wonder if he is financially embarassed by the £500K fine or if his severance package was good enough to allow him to not be too bothered about it?

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Chris Clark

Sep 12, 2012 at 18:12

Apparently James, I was told yesterday, when very wealthy bankers either retire or leave through some other reason, they quickly run out of friends who can't keep up with their lifestyle, or run out of seeing any meaning in their lives at quite an early age.

They get quite lonely.

The sensible ones do something about it, they become investors, or take up a cause.

However, when one is wealthy and banned or convicted in some way because they did something dishonest or wrong, not many people want to know about them.

So maybe the real sentence here isn't the almighty fine as we might see it. But the exclusion of any future meaning in their lives.

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Rob Walker

Sep 12, 2012 at 18:25

Hey these FSA boys move fast don't they !

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Franco

Sep 12, 2012 at 18:32

The fine is peanuts. Just the bonus he declined after leaving was £1.5mln, 3 times as much. His previous bonus was £1.25mln. He is laughing at you wage slaves and cannon fodder.

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edward coaker

Sep 12, 2012 at 18:41

PLEASE TO HEAR HE WILL NOT BE HOLD ANYMORE SENIOR POSITONS

THOUSANDS OF PEOPLE LOST THEIR JOBS LIKE MY SON AFTER 25 YEARS SERVICE AND INVESTED 15% OF HIS SALERY OVER THOSE YEARS IN THE SHARE SAVE SCHEME. LIKE MANY OTHERS AND LOST THE LOT..THE REAL WORKERS JUST LINE THE POCKETS OF THE DIRECTORS OF THESE BANKS LIKE FRED GOODWIN AND HIS CRONIES AND PEOPLE ARE TOLD

TO INVEST IN THIER EMPLOYERS NOT ANYMORE THEIRS TO MUCH GREED AND CORUPPTION..

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Martin Drew

Sep 12, 2012 at 18:44

Well I am sure he can pay it, but don't forget he was taxed on his bonuses and so the £1.25 million only netted him about £725,000 and with his lawyers fees and the fine I guess there is nothing left of that.

I think Chris Clark is right, having your working life over at his age is the real punishment, no matter how much you have in the bank. People at his level don't just work for money, it is the excitement, the adrenalin rush, the fun of doing the deal that is the real reward, and losing that will be the hardest part. Hopefully he will find some socially worthwhile way of occupying his time which will fill the vacuum.

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Steve Hayes

Sep 12, 2012 at 19:10

@chris clark

quote The sensible ones do something about it, they become investors, or take up a cause.

become investors, are you sure he should do that?

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mo khan

Sep 12, 2012 at 20:06

No matter what, his HBOS victims suffered long term damage, he should be jailed as the minimum for failing in his due diligence and skill and as reward for high risks alternative by Jailing him for playing with other peoples, clearly according to him there are more in the Banks. of course £500K goes to FSA coffers so they can pay themselves, up nicely thank you.

Who are FSA a body set up by, Banks for the Banks, so no conflict here then!

As he added: 'The fact that I am the only individual from HBOS to face investigation defies comprehension.'

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Chris Clark

Sep 12, 2012 at 20:37

@Steve Hayes,

I gave that some thought. He might not have that choice. Who'd want him on their share register? They'd lose every customer sales pitch.

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Bob saxton

Sep 12, 2012 at 20:40

I think it is time the FSA fines some of the US firms that set up these sub prime swindles. We would find a few billion quite handy.

Only joking I know it will not happen.

Bpb the electrician

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g hen

Sep 12, 2012 at 21:01

On Martin Drew's point-------Most of these people involved in high level banking do not pay PAYE and in fact are paid gross.

By the time they have employed family and friends and offset all expenses they do not pay anywhere near what you state in tax.

.

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Martin Drew

Sep 12, 2012 at 22:39

I stand corrected by g hen. I thought those abuses had been plugged some time ago, but if they haven't I suspect we both agree they should be.

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S G

Sep 13, 2012 at 09:18

He has been banned from holding a senior banking position, I am sure he will find something somewhere. Probably fit right into the oil industry! If nothing does come about, with his back ground skills and reputation he could easily get into politics!!

Now on a serious note, it is good to see the FSA fine an individual, which is what they should always do. Each time they fine a firm the fine cust gets passed onto customers!!!

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Rose G

Sep 13, 2012 at 09:19

What is the point of fining him a paltry £500K, that's pocket money for him. I am not sure why no criminal charges and custodial sentences are not being handed out, while they are at it, how about getting Turner to give up the proceeds instead of lining his pockets with the fines?

With billions being involved, where are risk management strategies for such events as these. If this is how big business is allowed to proceed unhindered until years after the event, no wonder our cowboy bankers with little between their ears, but lots of testosterone, have brought the world's financial institutions to the brink of disaster - if we are going to handle these fraudsters with kid gloves, how on earth are they going to learn a lesson of this not happening again?

Time and again, you will hear the media praising the likes of big businesses and the private sector models as if they were the bible, while denigrating our public services. Yes, I agree that public services do need to be reformed, but what lessons can public sector learn from the private - not much, if the model of private sector is to screw their very own clients - not shitting on their door step is one lesson it appears, they are not going to learn this decade or anytime soon!

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Anonymous 1 needed this 'off the record'

Sep 13, 2012 at 10:56

Good to see a timid effort has been made to take some action against an incompetent banker.

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Bob saxton

Sep 13, 2012 at 11:25

I would likr to suggest that we use a new epithet for the leaders of the banking industry. A crude, inappropriate and rhyming term of abuse has been used. I say "inappropriate" because these people are not self abusers, they abuse us. I would like to propose that in future we use for them, the noun,"banksters" to rhyme with gangsters.

I do not claim the authorship of this word.

Bob the electrician

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Martin Drew

Sep 13, 2012 at 11:42

Rose G asks what lessons can public sector learn from the private? I think maybe not much from many large public companies run for the benefit of their hired executives, but from true private companies run by their owners or still controlled by their founders I suspect quite a lot. It's off the point for this discussion, but if you want growth in this country (and judging by the protests at any talk of change I am not sure that most people do), but if you want growth it is that sector that the government should be helping.

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dd

Sep 13, 2012 at 13:58

Precisely, Martin D.

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mo khan

Sep 13, 2012 at 14:41

@Rose G. I agree

Media generally TV, is in blindness, and ambitious hence they end up with groveling and pandering to the finance sector, religiously promoting items in their story, telling it, as best thing ever with their own embellishments added, hyping up. Which even the markets start to be influenced by so Jaw jaw ends up as war, war; effect with almost no research and blind obedience

Put up or shut up culture is the price, innocent pay for. Clever Banks own and employ the FSA, and exists to prevent, bad news reaching Media either, Oiling it or better still get into it.

Wonder if all all the paltry fines collected by FSA go to finance this last activity..

These fines ? Once Collected. Where are they deposited, oh sorry Invested ?

Maybe some, from Media can enlighten?

After all FSA is another company set up by "Banks" now getting free air time and advertising. It's never going to bite the hands that feed it. i.e. Banks.

Are these Media presenters, anchors financially astute, do they even know how to invest or even buy stocks and even understand what the FTSE means or figures which they spew out towards the end of every news.

reporting etc. or are they merely ex-sports personalities turned finance reporting journos / pundits groomed by their Media Manipulates to mouth out whatever is put on their Teleprompter, praising, in every story, "Greed is good" motto as the new holy grail.

Except for Keiser report. Not a single one them has reported misbehaviour or suspicious behaviour in the money sector Industry, only as afterthought failing, ignoring or just in denial to read the signs but as a surprise After the damage is done and culprits have gotten away!

Banks should be chopped up into little pieces. Then they wont be too big to fail. Banks created FSA to prevent from this happening.

Remember we had Building Societies in our high streets, one I know still exists, Nationwide still fending of their rivals, Banks

@Bob the electrician-"Banksters" What a good description.!

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