Ex-HBOS boss in battle with FSA over fine

PETER Cummings, the man behind some of the most high profile loans made by Halifax Bank of Scotland (HBOS), has been handed a seven-figure fine by the City regulator.

The former corporate boss is believed to have been handed a “warning notice” by the Financial Services Authority, which has been investigating the bank’s buying spree at the height of the boom.

Cummings is understood to have rejected the allegations, however, and has previously argued that the FSA should either clear him or attempt to prosecute him if it has evidence against him.

The former teaboy from Dumbarton, near Glasgow, once stood in the top tier of the Scottish business establishment after presiding over a rapid expansion in Bank of Scotland’s corporate division.

His integrated finance division was set up in February 2000 and its investments, which came to well over £10bn, included deals with health club chain David Lloyd Leisure, upmarket shirtmaker TM Lewin, D&D Restaurants, founded by Sir Terence Conran, and the Sunseeker yacht company.

He stepped down in January 2009, however, after the sub-prime loans crisis triggered a series of bank failures. He left soon after Lloyds’ emergency takeover of HBOS and shortly before it posted a £10.8bn loss for 2008.

Last month the FSA said in an enforcement notice that HBOS had failed to rein in high-risk loans at its Bank of Scotland unit from April 2008 even as competitors pulled back because of worsening financial conditions. It said the “very serious misconduct” came despite warnings from the bank’s own risk officials and external auditor but declined to issue a fine, which could have come to £100m, because it would mean hitting taxpayers once again.

The watchdog said HBOS’s corporate unit pursued an aggressive growth strategy with a specific focus on “high-risk, sub-investment grade lending” in the property market.

Now Cummings’ case is set to be put to the Regulatory Decisions Committee (RDC), which can take submissions from both sides and has the power to overturn FSA sanctions.

He could argue that his biggest decisions were not prevented by Andy Hornby and Lord Stevenson, the respective former chief executive and chairman of HBOS.

Star JP Morgan Cazenove banker Ian Hannam is also taking his case to the RDC. Earlier this month Hannam resigned as the bank’s chairman of equity capital markets after the FSA demanded he pay a £450,000 fine.

The regulator said he had committed “market abuse” by leaking inside information about bid talks and oil discoveries made by his client Heritage Oil, to another client in the sector.

Both Lloyds and the FSA declined to comment on the Cummings case and the banker could not be reached.

PROFILE: PETER CUMMINGS
THE rise of Peter Cummings is almost as remarkable as that of his downfall. He joined a branch of Bank of Scotland as a school-leaver at the start of the 1970s.

He worked his way up to the top of the corporate bank and in 2006 was named chief executive of the division after years of generating huge profits. By the time he left, however, in January 2009, many of the loans had turned bad and his reputation had been shredded.

He retained the loyalty of many associates, however, such as Sir Tom Hunter, who said: “Every decision he took was done with the bank’s best interests at heart. He is a hard- working, dedicated guy and a tough but fair man to deal with.”

High-profile HBOS deals in Peter Cummings' era (figures represent total deal value)
£350m
HBoS supplied the debt for Glasgow’s Silverburn Shopping Centre. Its worth fell from around £350m to £250m in two years.

£700m
Backed the property company to the tune of £700m before Kenmore went into liquidation in 2009 as property slumped.

£450m
HBOS lent a consortium led by Sir Tom Hunter's West Coast Capital around £370m for the £450m buy-out. Lloyds later lost around £100m in the sale to Terra Firma.

£715m
Joined forces with Sir Tom Hunter (above) to buy Crest Nicholson, in a deal valuing the housebuilder at £715m, in 2007.