LONDON (Reuters) - Two former chief executives of HBOS will appear on Monday before British lawmakers conducting an inquiry into the bank’s near collapse in 2008, as part of a wider review of banking standards.
HBOS had to be rescued in 2008 through a government-engineered takeover by Lloyds Banking Group which, weeks later, needed to ask for a 20 billion-pound government bailout to stay afloat.
Andrew Tyrie, the conservative MP who heads the Parliamentary Commission on Banking Standards, said on Wednesday that the commission wanted to examine why HBOS failed and what lessons can be learnt to prevent future banking failures.
The commission will take evidence on Monday from James Crosby, HBOS chief executive between 2001 and 2005, and Andrew Hornby, who was CEO from 2006 until 2008. On Tuesday, it will hear from Lord Stevenson, HBOS chairman between 2001 and 2009.
“Two of these men were on the bridge when HBOS failed, when public money was needed to rescue it and when trust in our banking system - both within the industry and amongst the public - collapsed almost completely,” Tyrie said.
HBOS’s downfall was blamed upon the overly aggressive growth of its corporate division. Britain’s financial regulator has said the bank failed to rein in high-risk loans at its Bank of Scotland unit even as rivals were scaling back.
The Financial Services Authority in September slapped a record fine on Peter Cummings, who was head of corporate lending at the bank, and banned him for life from working in the financial services industry. Cummings started running the corporate division in 2006 under Crosby and continued in the role when Hornby took over as CEO in July 2006.
Tyrie set up a sub-committee to examine the demise of HBOS because an ongoing FSA investigation into the bank will not be completed until after the banking standards commission is due to report its findings.
The HBOS sub-committee is using legal counsel for the first time in a public evidence-gathering session. It said on Wednesday it has appointed Rory Phillips as specialist adviser with the power to examine witnesses, along with existing counsel David Quest.
Reporting by Matt Scuffham; editing by Larry King