Hubris: How HBOS Wrecked the Best Bank in Britain (41 page)
Read Hubris: How HBOS Wrecked the Best Bank in Britain Online
Authors: Ray Perman,Alistair Darling
The report, however, came a week after the FSA had been
abolished, to be replaced by two separate agencies, plus the Bank of England and the Treasury. The regulator had
failed to publish its own report on HBOS, which was left on the list of unfinished business to be completed by its successor.
The publication and widespread publicity led to demands for actions against the men named in the report. The Secretary of State for Business, Vince Cable, announced that he was investigating
whether they should be banned from being directors of any company. James Crosby was the first of three to respond, stepping down from his roles as an advisor to the equity investor Bridgepoint,
resigning as a trustee of the charity Cancer Research UK, asking for his knighthood to be withdrawn and voluntarily surrendering a third of his pension, estimated at over £570,000 a year for
life, index linked to the rate of inflation. Crosby had 284,758 HBOS shares at the time he resigned, but options and incentives could have brought this to more than 550,000. Had he sold two-thirds
of these at or near the peak price of £11 he could have realised up to £4 million.
Neither Stevenson nor Hornby made any comment, but Hornby’s employer, Gala Coral, issued a statement supporting him.
Pressure mounted on two former finance directors of HBOS to resign from their positions. Phil Hodkinson told the Resolution insurance group that he would not stand for re-election to its board,
where he was senior independent director, but Mike Ellis remained silent on his role as chairman of Skipton Building Society.
Drawing on the lessons from the HBOS disaster, Archbishop Justin Welby in effect called for a return to the past. He suggested the creation of a professional institute for banking to provide
training and police standards. He said that as banks ‘have the capacity to have such an impact on the wider economy’ then specific training should be necessary. ‘Banks are
incredibly complicated things, it is one of the most demanding and complicated areas of management going. The idea that people can hold hugely responsible positions in them without any kind of
formal training seems to a number of us as quite surprising.’ The bankers of 20 years ago would have agreed and banking institutes still exist in England and Scotland, but have largely been
bypassed by the banks.
Welby also wanted one of the big banks to be recapitalised and broken up to form regional banks, but his ideas fell on stony ground and failed to achieve a positive response from the Government.
In
fact the prospect of ending the strangehold of the Big Four on the British banking market looked more remote in 2013 than it had done a year previously. Then the sale of
more than 300 branches by RBS and 630 branches by Lloyds (forced on them by the European Commission as a condition for them being allowed to receive state aid) had promised to create one or two new
challenger banks. But in late 2012 Santander, the Spanish bank which had rescued Abbey, pulled out of the Royal Bank sale and six months later Co-operative Bank announced it would not go through
with the purchase of the Lloyds branches. Co-op also suffered a downgrade of its creditworthiness and sought new capital, while Lloyds said it would float TSB, a new company owning the 630
branches, on the stock market.
The lessons from the collapse of HBOS could not be more stark and were laid out with exemplary clarity by the parliamentary commission. Whether those lessons will be learned voluntarily by the
banks is much less certain. It will be up to governments, current and future, to use the regulators to enforce higher standards of ethics and training. Politicians must also accept that ‘too
big to fail’ can also mean ‘too big to manage’ and ‘too big to rescue’. Breaking up big banks would take political courage and impose short-term costs, but in the long
run it may be the cheapest way to ensure a sustainable banking system.
Notes & references
C
HAPTER
2: B
ASE METAL INTO GOLD
1
T.M. Devine,
The Scottish Nation 1700–2000
, Allen Lane, 1999, xxii
2
S.G. Checkland,
Scottish Banking, a history 1695–1973
, Collins 1975, 6
3
Ibid., 7
4
Ibid., 11
5
Andrew Forrester,
The man who saw the future,
Thomson Texere, 2004. 1–9
6
David Armitage, ‘Paterson, William (1658–1719)’,
Oxford Dictionary of National Biography
, Oxford
University Press, 2004; online edn, Sept 2010 [http://www.oxforddnb.com/view/article/21538]
7
Douglas Watt,
The Price of Scotland; Darien, Union and the Wealth of Nations
, Luath Press, Edinburgh 2007, 1
8
Ibid., 17
9
Forrester, 62–3
10
Checkland, 15
11
Alan Cameron, ‘Holland, John (1658–1721)’,
Oxford Dictionary of National Biography
, Oxford
University Press, 2004; online edn, Jan 2008 [http://www.oxforddnb.com/view/article/13531]
12
Forrester, 140
13
Alan Cameron,
Bank of Scotland 1695–1995: a very singular institution
, Mainstream 1995, 21
14
Checkland, 29–30
15
Watt, 63
16
Checkland, 33
17
Ibid., 36
18
In the event only the Scottish commissioners got all the money promised them, leading them to be dubbed ‘a parcel of
rogues bought with English gold.’ Cameron, 32
19
Cameron, 36
20
Queen Anne
, David Green, Collins, 1970, 335
21
Checkland, 60
C
HAPTER
3: A
COSY WORLD
1
There are two histories of Bank of Scotland’s first 300 years. See bibliography
2
Now the Chartered Institute of Bankers in Scotland
3
Cameron,
Bank of Scotland
, 225
4
Quoted in ‘Banks, bailouts and bonuses: a personal account of working in Halifax Bank of Scotland during the financial
crisis’, Vaughan Ellis and Margaret Taylor,
Work, Employment & Society, December 2010; vol. 24, 4:
803–812. N.B. ‘Margaret Taylor’ is a pseudonym
5
Financial Times
, 30 October 1999
6
Richard Saville,
Bank of Scotland: a history, 1695-1995
, Edinburgh University Press, 1996, 700
7
Ibid., 718
8
Cameron, 230
9
Saville, 783
C
HAPTER
8: N
O TURNING BACK AT
D
ERBY
1
Financial Times
, 2 October 1999
C
HAPTER
14: G
IVE ME ENOUGH DEBT AND
I’
LL MOVE THE WORLD
1
Who Runs Britain?
Robert Peston, Hodder & Stoughton 2008, 93
2
Ibid., 95
3
The Daily Telegraph
, 13 October 2003
4
Financial Times
, 22 October 2004
5
Peston, 135
6
The Daily Telegraph
, 13 October 2003
7
Financial Times
, 24 November 2003
8
Financial Times
, 9 October 2006
9
The Daily Telegraph
, 4 April 2010
10
Financial Times
, 9 October 2006
C
HAPTER
15: A
S SAFE AS HOUSES
1
Daily Mail
, 1 November 2006
2
BBC, 2 February 2004, http://news.bbc.co.uk/1/hi/business/3478635.stm
3
The Daily Telegraph
, 28 June 2008
4
Financial Times
, 2 March 2006
5
The Independent,
3 October 2007
6
HBOS Report & Accounts, 2007
7
Quoted at http://www.ianfraser.org/a-brief-history-of-halifax-bank-of-scotland/
C
HAPTER
16: Z
IGGY
’
S STARDUST
1
Bowie Bonds did not fare well. The singer’s later albums were not as popular as his earlier ones and the bonds, never
very highly rated, were marked down to ‘junk’ status.
2
Saville, 796
3
Asset Backed Alert
, Harrison Scott Publications Inc., 21 November 2003
4
The Credit Crunch
, Alex Brummer, Random House Business, 2008, 78
5
Back from the Brink,
Alistair Darling, Atlantic Books, 2011. Kindle edition location, 281
C
HAPTER
17: T
HE EYE OF THE STORM
1
The Times
, 13 December 2008
2
Financial Times
, 27 February 2008
3
The Times
, 13 March 2008
4
Beyond the Crash
, Gordon Brown, Simon & Schuster, 31
5
Sunday Herald
, 8 March 2009
6
See http://www.breakingviews.com/europes-great-bank-balance-sheet-fiddle/1615635.article where it is
argued that Lloyds reduced HBOS risk-weighted assets by £34 billion by switching from the IRB to the Foundation method
7
Birmingham Post,
30 April 2008
8
The Times
, 20 June 2008
9
Brown,
Beyond the Crash,
35