Peter Cummings was not alone: FSA must do better than this

As I explained recently, my new book (Hubris: how HBOS wrecked the best bank in Britain) has nothing to do with Canna but John Lorne Campbell would forgive me borrowing space here – the FSA report on Peter Cummings has arrived before my brand new Hubris blog is ready to go live! – injustice was something he detested.


What is amazing about the FSA judgement on Peter Cummings is not that they fined him £500,000 or banned him from financial services – as the man who presided over the HBOS corporate banking department responsible for the lion’s share of the losses some might think he got off lightly – but that no-one else appears to be under investigation.

The FSA is obliged to give notice if they are contemplating “enforcement” proceedings against individuals, which they gave to Cummings last year. But as far as we know no-one else has been notified or had his actions and decisions investigated in any depth at all.

What makes this all the more surprising is that the FSA’s own report on the HBOS corporate banking operation, published in March, revealed the pressure put on Cummings to produce more profit, which the group needed to make up the shortfall in earnings from its mortgage business.

In 2006 corporate banking suggested it could make 9% more profit in the coming year – but were told to double it (which they did). In 2007 corporate budgeted for 10-12% profit growth – but were told to bring in 22%. In April of that year the target was upped to 30% and in June it was increased again to 35%.

Cummings was accused by the FSA of being overly optimistic, but he wasn’t alone. Read the 2007 HBOS report and accounts. Chairman Lord Stevenson talks of “the confidence we have in the continuing earnings momentum and strong cash generative capabilities of HBOS.” Chief Executive Andy Hornby writes of being well placed to take opportunities and declares “Growing our UK businesses remains our number one priority.” This at a time when the market was already on the way down.

Yet reading the FSA statement you might conclude that Cummings was a rogue trader who brought down the bank all on his own. No mention of the losses on the dodgy mortgages (125% loans, buy-to-let and self-certified), in the Irish property market or US mortgage securities, none of which had anything to do with him. Nor of the mis-selling of PPI which has cost Lloyds (the unfortunate new owner of HBOS) hundreds of millions.

Tens of thousands of people lost their jobs in the collapse of HBOS and hundreds of thousands – many of them employees in the share ownership scheme or savers who got shares in the Halifax demutualisation – lost their life savings. Four years after the event they are owed a better explanation of what went wrong than this.

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