Damning report on banking collapse stalled until after UK election
Senior Labour politicians, bankers and financial regulators are expected to receive damning criticism for their role in the bank’s near-crash in 2008.
Originally scheduled for publication in April 2013, the deadline was pushed back to the end of 2013 last summer and is now unlikely to be published until September at the earliest.
Business Secretary Vince Cable attacked the delay, saying the employees who lost their jobs as a result of irresponsible management at HBOS deserve better.
This latest delay is believed to be caused by a procedure called “Maxwellisation,” named for 20th century British media mogul Robert Maxwell, whereby individuals facing criticism in an official report are allowed to respond before its publication.
Disgraced former HBOS executives Andy Hornby, James Crosby and Lord Stevenson are expected to come under fire for their role in the bank’s downfall.
Hornby, who is currently CEO of bookmakers Coral, replaced Crosby as CEO of HBOS in July 2006, leading the bank during the height of the financial crisis.
A 2013 report by the Parliamentary Commission on Banking Standards described Crosby – who was knighted shortly before stepping down as CEO – as the “architect of the strategy that set the course for disaster.”
Stevenson acted as chairman of HBOS from 2001 until his resignation following the bank’s emergency rescue-merger with Lloyds TSB in 2008.
A separate report carried out by Andrew Green QC will investigate whether the FCA should take further action against Hornby, Crosby and Stevenson.
All three were let off the hook by the FCA’s predecessor, the Financial Services Authority (FSA).
Peter Cummings, who ran Bank of Scotland’s corporate division, is the only HBOS executive to be punished for his role in the bank’s reckless lending practices, which eventually resulted in a £20 billion government bailout.
Cummings, who was fined £500,000 in 2012 and received a lifetime ban from the City, described the punishment as “tokenism at its most sinister.”
While under Cummings’ leadership, Bank of Scotland’s corporate division continued expanding in the months leading to the financial crisis even as competitors were pulling back.
The inquiry into HBOS’ near-collapse has been marred by a series of costly delays since it was launched by the Financial Services Authority (FSA) in 2012, bringing the predicted total bill to more than £1 million.
Senior figures in government, including Cable, have attacked the latest delay, which will push the publication date back to some point after the general election in May.
“We are now more than six years on from the banking crisis. The people whose livelihoods have been wrecked by the irresponsible behavior at HBOS and other banks deserve better than this,” Cable said.
“Holding up this report prevents us from making judgment on whether there has been wrongdoing and fraud and whether more former executives need to be punished,” he added.
A member of the Treasury Select Committee said lessons from the company’s crash would not be learned in a “timely fashion” as a result.
“The whole point of these inquiries is to learn the lessons of the past,” Mark Garnier MP told Sky News.
“If the regulators take so long that it is nine months behind its own deadline, you end up not learning those lessons in a timely fashion.”
Senior political figures are also expected to come under scrutiny in the report, including former Prime Minister and Chancellor Gordon Brown.
While Chancellor of the Exchequer, Brown oversaw a policy of “light touch” regulation, which failed to rein in the banks’ increasingly careless lending practices.
The inquiry’s findings are likely to reflect poorly on current senior Labour figures, given their close involvement in Brown’s economic agenda at the time.
In the years leading up to the financial crash, Labour leader Ed Miliband was a confidante of Brown, serving as Chairman of HM Treasury’s Council of Economic Advisors.
Shadow Chancellor Ed Balls was an economic adviser to Brown in 1994. After Labour came to power in 1997, Balls went on to serve as Economic Secretary to the Treasury from 2006 to 2007.
While this latest delay will rack up even more expenses for the taxpayer, it will help to keep Labour’s patchy record on financial regulation out of the headlines during this crucial period ahead of May’s election.
A spokesman for the FCA said: “We are committed to publishing the report as soon as possible but the legal process of Maxwellisation is currently under way and this can take some time.”