The City watchdog today launched a scathing attack on the HBOS corporate lending empire headed by Peter Cummings for “very serious misconduct” in the run-up to the financial crisis.
The bank failed to control risky lending, the Financial Services Authority said, in an extremely damning attack on how the division, known as Bank of Scotland, was run.
HBOS ignored warnings from its internal risk officials and external auditor KPMG, the FSA said. It breached rules requiring banks to put in place adequate risk management systems and failed to rein in risky lending as its peers pulled out of the market amid deteriorating financial conditions from April 2008.
The bank had to be bailed out by the taxpayer and then taken over by Lloyds to protect Britain’s banking system.
Ordinarily, such flagrant breaches would result in a massive fine. But the FSA said that, with taxpayers being the biggest shareholder, this would only have the effect of punishing taxpayers twice.
The report from the FSA followed an investigation into the bank’s actions and did not blame any individuals.
Asked if Cummings was under investigation, the FSA refused to comment. It said: “Today’s publication is enforcement action against the firm. But there are other ongoing proceedings that remain subject to the necessary legal processes.”
Tracey McDermott, acting director of enforcement, said: “A failure to meet regulatory requirements can end not just in massive costs to a firm, but losses to shareholders, taxpayers and the economy.”
