Financial regulators should consider banning three top HBOS bankers from future roles in the financial sector, an influential committee has said.
The Banking Standards Commission said former bosses Sir James Crosby, Andy Hornby and Lord Stevenson were largely to blame for the bank's collapse.
It accused them of a "colossal failure" of management at the bank which had to be rescued in 2008.
On Friday, Sir James resigned as adviser to investment firm Bridgepoint.
The BBC understands that he was asked to resign by the board of the private equity firm.
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Banking Standards Commission chair Andrew Tyrie says there was "a colossal failure of leadership"
So far there has so far been no response from the three men to the findings.
The Banking Standards Commission was set up to improve the UK's banking system following the 2008 financial crisis. Its members are MPs, members of the House of Lords and the Archbishop of Canterbury.
Now-defunct City regulator the Financial Services Authority (FSA) also came in for criticism, with the commission saying it was "unsatisfactory" that the watchdog appeared "to have taken no steps to establish whether the former leaders of HBOS are fit and proper persons to hold the approved persons status elsewhere in the UK financial sector".
Halifax Bank of Scotland is now part of Lloyds Banking Group, which is currently 39% state-owned. The group stressed that the relevant events happened before it owned HBOS.
"We continue to focus our efforts on rebuilding the group for the benefit of our customers, employees and shareholders," its spokesperson said.
The commission accused the bank of "reckless" lending policies that resulted in losses of £46bn.
"Start Quote
End QuoteThis report stands out as a cracking page turner. It's because its authors have a cracking turn of phrase and because they have made it about the people at the top of HBOS, and their individual and collective roles in driving it spectacularly over a cliff. "
Such losses would have led to insolvency, had the bank not been bailed out by the taxpayer and Lloyds TSB, the commission claimed.
The report, called An Accident Waiting to Happen, said that £20.5bn of public money went into the rescue of HBOS before and after its merger with Lloyds.
'Too much risk'The commission concluded that two former chief executives, Sir James Crosby and Andy Hornby, were mainly to blame for the collapse of the bank, together with its former chairman, Lord Stevenson.
"The primary responsibility for the downfall of HBOS should rest with Sir James Crosby, architect of the strategy that set the course for disaster, with Andy Hornby, who proved unable or unwilling to change course, and Lord Stevenson, who presided over the bank's board from its birth to its death," said the report.
"Lord Stevenson, in particular, has shown himself incapable of facing the realities of what placed the bank in jeopardy from that time until now."
In written evidence to the commission last December, Lord Stevenson admitted that the bank took on too much risk in the run-up to the 2008 financial crisis.
Who are the HBOS three?
Andy Hornby, chief executive of HBOS from 2006
- Degree in English from Oxford University and MBA from Harvard Business School
- 1996 - 1999: Senior roles at Asda, including managing director of the George clothing brand
- 1999 - 2008: Senior roles at Halifax and later HBOS, becoming chief executive in 2006
- 2009 - 2011: Chief executive of Alliance Boots
- 2011 - Present: Chief executive of bookmakers Coral
Sir James Crosby, chief executive, HBOS chief executive from 2001 to 2006
- 1994: Joins Halifax bank as managing director of Halifax Life after 20 years in financial services
- 1999: Becomes chief executive of Halifax, and first chief executive of HBOS in 2001
- 2004: Appointed a non-executive director of the Financial Services Authority (FSA), while still head of HBOS
- 2007: Becomes deputy chairman of the FSA following resignation from HBOS in 2006
- 2009: Resigns from FSA
- 2006 - Present: takes on various roles including non-executive director of Compass Group, chairman of Mysis, a trustee of Cancer Research UK, and an advisory role at private equity firm Bridgepoint
- 2013 - asked to resign by board of Bridgepoint
Lord Stevenson, chairman of HBOS from 2001 to 2008
- Begins business career in the 1960s after leaving university
- 1979 - Present: Takes on several non-executive directorships at companies including BskyB, Pearson, Manpower and Western Union.
- 1997 - 1999: Knighted and later made a peer for life, taking a seat in the House of Lords
- 1999: Appointed chairman of Halifax, and later HBOS after its formation in 2001
- 2008: Stands down as chairman of HBOS
- Presently director of Cloaca Maxima, a consultancy, and non-executive director of Waterstone's
The former head of wholesale banking at HBOS, Peter Cummings, was fined £500,000 and banned from working in senior financial roles by the FSA last year.
But the Commission expressed surprise that no-one else had been punished.
While the three executives saw their "Approved Person" status at HBOS lapsing, they did not face any further sanctions.
An Approved Person is someone who is permitted to carry out particular financial functions by the FSA.
"The FSA appears to have taken no steps to establish whether they are fit and proper persons to hold Approved Person status elsewhere in the UK financial sector," said the report.
Flawed strategyThe report said the strategy set by the board after 2001 "sowed the seeds of its destruction".
That was the year in which the Halifax and the Bank of Scotland agreed to merge, forming HBOS.
It was too aggressive in accepting more risk across all its divisions, said the report, and it indulged in "reckless lending" that lost it a total of £46bn.
That included losses of £25bn in its corporate division, and £14.5bn in Australia and Ireland.
Senior executives of HBOS tried to blame the losses on the temporary closure of wholesale markets.
During the financial crisis, banks stopped lending to each other, resulting in their short-term supplies of funding drying up.
But members of the commission said they were disappointed by such explanations, as it was the lending approach that was to blame.
"This culture was brash, underpinned by a belief that the growing market share was due to a special set of skills, which HBOS possessed and which its competitors lacked," said the report.
"This was a traditional bank failure, pure and simple. It was a case of a bank pursuing traditional banking activities and pursuing them badly."
Ray Perman, the author of Hubris: How HBOS Wrecked the Best Bank in Britain, said the commission's criticism was unusual in singling out individuals.
"For the first time, blame is squarely pinned on the people who deserve it - the chairman, the two chief executives," he said.
"What they did was to pursue a very fast growth strategy, regardless of the risk and they fooled themselves into thinking that their initial success was [because] they were better than everybody else, but eventually those risks caught up with them."
Failure of regulation"Start Quote
End QuoteIt is unprecedented for MPs and peers to suggest that a group of senior bankers should be banned from working in the City."
The commission said the FSA's regulation of HBOS was "thoroughly inadequate".
In the three years following the merger, it said, the regulator managed to identify some of the issues that would contribute to the group's downfall, such as its aggressive pace of growth and its reliance on wholesale funding, as opposed to using its own savers' deposits.
But it failed to follow through on these concerns and was too easily satisfied that they had been resolved.
From 2004 to 2007, the FSA was "not so much the dog that did not bark, as a dog barking up the wrong tree", claimed the report.
There was too much supervision at a low level and too much box-ticking, it said.
The report requires the FSA to answer nine questions about its failures.
But since the FSA was abolished five days ago, on 1 April, it will not be able to do so.
Instead, its replacement, the Prudential Regulation Authority, said it would be studying the report, "to ensure that the lessons from the failings at HBOS have been fully learned".
A further report into the collapse of HBOS, started by the now disbanded FSA, will be completed by a new regulator, the Financial Conduct Authority.
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