THREE themes emerge from the evidence of former HBOS chief executives Sir James Crosby and Andy Hornby, and ex-chairman Lord Stevenson, to the Parliamentary Commission on Banking Standards over the past couple of days.
HBOS was a poorly run bank anyway, with poor risk controls. Secondly, it might have got away with it for longer without the unprecedented freezing of the wholesale money markets in 2007 that the entire corporate deck of cards rested on.
And, thirdly, Crosby and his chairman in particular prefer to dwell on that wholesale market freeze rather than the bank’s own flawed business model and cavalier lending practices. Unsurprising, really. It is human nature to look for the things you could not affect in your downfall rather than one’s own feet of clay. That way the perception of ineptitude can be leavened with something as comforting as simple bad luck.
In fairness, Crosby and Stevenson admitted to the MPs that the scale of the HBOS catastrophe, and the bank’s bail-out by rival Lloyds, was too big to be blamed solely on the wholesale funding collapse.
But the former HBOS chiefs repeatedly returned to how unprecedented the near financial sector collapse was, as if wistful that if only it had not not happened and shown the HBOS emperor had no clothes the bank would have gradually evolved into a better, more safer operation.
Possibly. But it is just as arguable that the debacle, for which the taxpayer remains on the hook for £17 billion including the Lloyds bail-out, would have been delayed at HBOS rather than averted.
The group’s decision to plough into the property market at the height of the cycle, lend big to entrepreneurs, and take large equity stakes, was a potential disaster waiting to happen regardless of the bank’s risky dependence on money markets.
HBOS’s corporate division may have inhaled the heady drug of available cash the Halifax was throwing off – a cornerstone rationale for the merger with Bank of Scotland in 2001 – to become ever more ambitious in its lending.
But the latest evidence, particularly uncompelling from a gesticulation-prone Stevenson yesterday, suggests strongly that, if the corporate lenders were running amok at HBOS, they were doing it not in secret but under the clear gaze of the bank’s board over a period of years.
It makes it less fathomable than ever that Peter Cummings, former head of the division and now banned and fined by the Financial Services Authority, had been the only one to take the regulatory fall for the catastrophe.
HBOS billed itself as the new kid on the block to take on the fig four banking incumbents.
But its business model was one only for blue skies. That does not make for banking longevity.