LONDON Bailed out British lender HBOS would have failed even without the 2008 financial crisis, a panel of parliamentarians said in a report which blamed three men still in positions of influence in business and politics.
The Parliamentary Commission on Banking Standards, tasked with finding ways to reform UK banks, said HBOS was an "accident waiting to happen," with bad lending and losses across the business likely to have led to its insolvency even without the funding and liquidity problems of the financial crisis.
Although regulators bore some of the blame, primary responsibility lay with Dennis Stevenson, chairman from the formation of HBOS in 2001 until its collapse, and former chief executives James Crosby and Andy Hornby, it said on Friday.
There was a "colossal failure of senior management and the board", said Commission chairman Andrew Tyrie, a Conservative MP who expressed surprise that only Peter Cummings, who was head of corporate lending at HBOS, had so far been punished.
Cummings was fined 500,000 pounds by the Financial Services Authority (FSA) in September and banned for life from the industry.
HBOS, Britain's biggest mortgage lender, had to be rescued via a government-engineered takeover by rival Lloyds, which subsequently needed a 20-billion-pound bailout to survive.
The Commission said the regulator should consider if Stevenson, Crosby and Hornby should be barred from working within the financial services industry in the future.
Hornby, who since leaving HBOS has worked as chief executive of healthcare group Alliance Boots and is currently the boss of betting shop chain Coral, declined to comment on the report.
Crosby, a senior independent director at the world's biggest catering company Compass and an adviser to private equity firm Bridgepoint, as well as Stevenson, who sits in the upper chamber of parliament, could not be reached for comment.
HBOS was created in 2001 by a merger between Halifax, a former English building society, and the 300-year-old Bank of Scotland. It ramped up lending using cheap funding on the wholesale markets rather than safer customer deposits, and its high-risk strategy was exposed when that funding dried up following the collapse of Lehman Brothers in 2008.
HBOS's managers blamed the financial crisis for the collapse. But the Commission said the bank's business model was inherently flawed and its board was a "model of self-delusion."
"The sums would never have added up," Tyrie said.
"The Commission has estimated that, taken together, the losses incurred by the corporate, international and treasury divisions would have led to insolvency, regardless of funding and liquidity problems, had HBOS not been bailed out by both Lloyds and the taxpayer," he said.
The Commission said 25 billion pounds was lost on bad corporate loans and there were losses of 15 billion at its international business and 7 billion at its treasury unit.
Crosby was chief executive of HBOS between 2001 and 2006 before being succeeded by Hornby.
(Editing by Mark Potter)