Andy Hornby answering questions

The guilty have been named. Now they must be punished


The significance of the HBOS report from the Parliamentary Commission is not in any new evidence it has uncovered – we always knew why the bank went bust – but in the uncompromising way in which it named the men primarily responsible for bringing it down, chairman Lord Stevenson and chief executives Sir James Crosby and Andy Hornby.


HBOS guilty screengrab
The HBOS Three: grabbed from the BBC website:


It is a scandal that we have had to wait four years for this to happen and a double scandal that the Financial Services Authority, which ceased to exist last weekend, ducked the task, seeking instead to put all the blame on one man, ex-HBOS corporate director Peter Cummings.

The big question is what happens now. Crosby keeps his £570,000 a year pension and his knighthood, Hornby still runs Coral Leisure, the betting shop chain, Stevenson still sits in the House of Lords. Technically nothing can happen. The FSA, which had the power to fine them, as it did when it imposed a £500,000 penalty on Cummings, is gone. They are not even banned from joining a bank again – although it would be a brave board which recruited any of them.

Their humiliation will last a short time. Headlines are soon forgotten and memories fade. Does it matter?

Yes, for two reasons. Firstly, millions of small shareholders lost up to 95% of their investments when the bank went down, and tens of thousands of employees lost their jobs. Worst affected were the bank staff who had invested their bonuses in HBOS shares and held on, believing the reassuring words which came from Hornby as the bank lurched towards insolvency. Many of them have lost their livelihoods and their savings.

There is a palpable sense of anger and injustice among these people and the millions of customers of Bank of Scotland and Halifax who saw trusted institutions wrecked in less than ten years. Some retribution, however symbolic, is needed before they can get closure.

The second reason is deterrence. As the report makes clear, HBOS was run at a reckless pace so that the crack in its funding which was recognised in its first business plan in 2001 was an unbridgeable chasm by 2008 when markets stalled. During this time large salaries and huge bonuses were earned, based on profits which proved in the end to be illusory.

Yet no bonuses have been clawed back and no financial penalties imposed. What is to deter future bankers from following a similar strategy when all they face is a short period in the doghouse?

The FSA has gone, to be replaced by an alphabet soup of new bodies. I can’t see any of them wanting to reopen this cold case unless there is political pressure to do so. Our parliamentarians have done the first part of the job admirably. Now we need them to finish it.