RegulationApr 11 2013

HBoS timeline: An accident waiting to happen

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2001- HBoS was created by the merger of the Bank of Scotland and Halifax. Chief executive James Crosby gave a public target for the new group to increase the return on equity from an underlying figure of 17 per cent in 2001 to 20 per cent by 2004.

2002 - An FSA review identified serious concerns about the group’s control functions.

2003 - FSA expressed concern about the failure by HBoS to properly address the findings of the 2002 review by increasing the capital requirement on the bank by 0.5 per cent to 9.5 per cent.

2004 - Mr Crosby appointed non-executive director of FSA. Discussion at HBoS board meeting said FSA was reported as viewing HBoS as an “accident waiting to happen”. FSA commissioned PwC to undertake a skilled persons review. An Arrow review noted that HBoS’s risk profile had made good progress. FSA reversed the increase in the capital requirement in December 2004.

2006- Sir James Crosby knighted for contribution to financial services. Andy Hornby replaces Sir James as chief executive.

2007- An evaluation by the FSA of points raised in its previous Arrow reviews concluded that many of the issues had been addressed and could be closed. Sir James appointed deputy chairman of the FSA.

2008 - The FSA wrote to Peter Cummings, HBoS’s head of corporate lending, to inform him that the review had identified shortcomings in the sphere of credit risk management and processes. In October 2008 HBoS received a government bailout and was taken over by Lloyds.

2009 - Paul Moore, former head of risk for HBoS, told the Treasury select committee that he had been sacked by Sir James for raising concerns about risky lending. This led to Sir James resigning as deputy chairman of the FSA. He claimed that Mr Moore was dismissed as part of a restructure.

2012 - FSA censures HBoS but decides to not to levy a fine in order to save taxpayers’ money. Mr Cummings was fined and banned from financial services.

2013- MPs call for regulator to consider bans from financial services for senior HBoS executives after report highlights individual and regulatory failures.