Evasive, repetitive, unrealistic. Unless my old newspaper instincts have deserted me that description by Andrew Tyrie of Lord Stevenson’s evidence to the Parliamentary Commission, is what will make the headlines. And the former HBOS-chairman will find it hard to outlive the label.
It is difficult not to suspect that it was always Tyrie’s intention to make the news – partly because it doesn’t do any MP’s career any harm to have a good soundbite, but partly also to get the HBOS scandal back into the public consciousness.
Because of its size, the collapse of Royal Bank of Scotland was the biggest failure, but as the Commission has tirelessly pointed out, in some ways HBOS was worse. Forget “impairments,” “fair value adjustments” and all the other accounting euphemisms, in real money HBOS lost upwards of £45 billion – as a proportion of its total lending that was twice as bad as RBS.
As Tyrie pointed out, it is equal to two-thirds of the total corporate tax take of the UK, “down the Swanee.”
Stevenson, if anything, came off worse than Crosby. He looked naïve, increasingly rattled and, in the words of Lord Lawson, delusional. He clung to the belief that what did for HBOS was the collapse of Lehman Brothers and the closure of global wholesale money markets. The eye-watering losses on corporate lending, loans in Ireland and Australia and on buy-to-let, self-certified and 125% mortgages were, in his view, a secondary factor.
The Commission clearly thinks the opposite and believes the board, by not focussing on the inherent flaws in the fast-growth business model, was negligent.
I am amazed to find that Tyrie is an economist by training rather than a lawyer, because his cross-examination technique is superb. By means of the “competent/incompetent” trap into which he led Crosby the day before, he lured Stevenson into the sucker question: Are you a fit and proper person to be the director of a financial services company because “competence” is one of the tests the FSA applies.
Stevenson’s answer, that it was not a relevant question because he was more interested in spending time with his grandchildren rather than again becoming involved in finance, set him up for the coup de grâce – Tyrie’s revelation that until a week before Stevenson had been a director of Loudwater Investment Partners, a company run out of Stevenson’s own Westminster town house and regulated by the FSA.
How on earth did the regulator let that happen? And while we are at it, why is former finance director Mike Ellis still chairman of the Skipton Building Society?
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One response to “Stevenson receives the coup de grâce”
When Andy Hornby came to the bank from Asda, branch staff were told that he had told/promised the city that he was going to grow current accounts by 1 million. Current accounts are one of those things that people don’t usually think about moving so if you have the current account you have the salary, probably the mortgage and from there you can sell all of the add ons.
Current accounts became one of the key measures for branch staff bonuses but without any regard or interest in quality.
A customer would come in and ask for their card cash account to be upgraded to a current account. Upgraded accounts didn’t count so they would be told that a new application had to be done and they got a new account. I’ve seen cases where people went in for savings accounts and were told that they needed to have a current account to run alongside it (they didn’t).
I’ve seen cases where the partners of staff had three or four current accounts.
To get around it the company said that it only counted if it had a credit. Cashiers would have a pot with paper clips and pennies next to the till. At the end of the day interviewers would hand over their current accounts that they had opened for them to be credited with 1p.
To get around it the company said that it only counted if it had a credit of at least £10. At the end of each month a branch managers could use their suspense account to credit each of the accounts with £10. Leave it in overnight and then the next day take it back out. One manager I knew was eventually disciplined for this.
To get around it the company said it only counted if it had a salary credited, That brought it to an end but thousands of unwanted unused accounts were opened. Accounts that made the bank look good to the city but were of absolutely no value because in many cases people didn’t know they had them.
I visited branches across the south east and staff were usually happy to talk about how the branch bonus was progressing and what they were having to do to keep earning it.
I was in a banking hall when a customer came in and in very poor English asked for an envelope to be handed to an interviewer. I was going into the staff room when the envelope was brought in to the staff member making a cup of tea. The envelope was opened and she said to her colleague ‘it’s a credit card app with ccrc’ (credit card repayment cover) she was asked ” I could hardly understand her how did you manage to sell the ccrc?” The answer was “tough, if they don’t understand English they get the cover”.
I was asked by a branch manager to speak to a customer who wanted a personal loan. The customer was known to the branch P.F.A. The customer did not have the income from his job to justify the loan. I told the manager and the P.F.A. that there was no point as it would fail, I was told that he had a rental property and that the rent would cover it and to include the rent as part of his income. I pointed out that if the tenant left he would be in trouble, I was told not to worry and that it was needed for the branches targets. I spoke to the assistant manager who also had some responsibility for risk and compliance and was told by her to just do it. The loan went through.
We had a client who was in trouble, he was self employed but business wasn’t great so he came in on a regular basis for larger and larger loans. Branch staff were warned about ” churning”. I saw him one day in the banking hall and said to the manager and the assistant branch manager that it was only 5 months since his last loan and we couldn’t key another loan for him. I was told that it was his decision and he always took plrc (personal loan repayment cover) which was a key bonus measure. I refused to see him but somebody else did and he took £25k with another £7k for the insurance.
I talked to a mortgage adviser and asked how she was doing and she said “I’ve had a good week and I’ve only had to bump the income on a couple of them”
Counter staff were pushed at the beginning of the day and throughout the day to generate leads. Failure to sell could/would eventually lead to disciplinary action. Managers could record that failing staff had received coaching/support and then the process of easing them out could continue.
Managers were no safer, they reported to an area sales manager and each day they had to phone the A.S.M. and give their results and explanations for any targets not hit.
In an environment based so completely on sales, quality of business and customer care would always be a long way behind hitting bonus figures whether for the money or to protect your job.