Report found old-fashioned bad lending to blame at bank

UNLIKE the other bank collapses that peppered the financial crisis, HBOS could have fallen in any market due to terrible risk control and a desire to grow at any cost.

This was the conclusion of last week’s report from the parliamentary commission on banking standards which states: “As a home-grown banking failure in traditional banking, HBOS stands alone.”

In short, the MPs and peers who sat on the panel concluded that HBOS – more than any other major UK bank failure during the period – was the result of poor management of the ongoing business, rather than a mistaken acquisition or a liquidity crisis.

It is this particularly damning verdict on the banking abilities of the company’s leadership that has left the three leading executives involved fighting to defend their reputations.

The report states that their actions between 2001 and 2007 constituted “a manual for bad banking” while checks and balances at board level should be considered “a model of self-delusion”. Executives tended to have come from the retail business, meaning there was little understanding of the other booming division at board level.

More than anything the report blames a culture of self-belief where directors were convinced HBOS could do no wrong. They may now think otherwise.