Two journalistic heavyweights - Patrick Hosking in the Times and Financial Services Club friend Ian Fraser - have highlighted a number of questions that the Treasury Select Committee should ask Sir James Crosby, former Chief Executive of HBOS (now Lloyds), today.
Sir James will be appearing in front of the Treasury Select Commitee at 3:30 GMT and the questions are pretty meaty. Purely because of the evidence against Sir James, it will be interesting to see his response, if these questions are asked.
Here's my summary of the most crucial pieces:
HBOS became reliant on wholesale funding in
the early years of the Crosby era, in spite of warnings about the dangers.
Sir James humiliated, ridiculed or sacked anyone who told him he was wrong, e.g. in creating excessive risk.
Corporate lending was told to ramp up its loan
book from £35 billion to £66 billion in the space of just two years under his
leadership.
HBOS
changed from a fuddy-duddy bank to a supermarket-style culture, where customers were force-fed products they didn’t need
under his watch.
He is an actuary with less excuse than most
for miscalculating the risks he so carelessly allowed the bank to take.
HBOS
is a special case because thousands of small investors lost their savings
(remember the three million shareholders created through the demutualisation of
the Halifax Building Society).
Sir James has never apologised.
He
spent a decade in the gravy boat and paid nothing back (he left HBOS in 2006
with an index-linked pension of £572,000 a year; by comparison, Fred Goodwin gets
£342,500).
Even more telling is his relationship with Gordon Brown and the Financial Services Authority (FSA):
How did he become an FSA director in 2004,
when he spent most of the years before complaining about regulator’s meddling?
Why was he made deputy chairman of FSA and chairman of the FSA’s committee of non-executive directors in December 2007?
Did his presence persuade the FSA to ‘go soft’ on HBOS, e.g. what part did he personally play in getting
the FSA to grant HBOS ‘Advanced Internal Ratings Based’ (AIRB) status in
January 2008? By giving the bank AIRB status, the FSA was saying it trusted the
bank to do its own risk-modelling and to use its own-internally generated
models to determine its own capital requirements.
What part did his close friendship
with former chancellor and former prime minister Gordon Brown play in all of this,
e.g. was Gordon Brown instrumental in ensuring that Crosby was
knighted “for services to the finance industry”
in June 2006?
Given the financial carnage for which
he is responsible, why is he still a 'Sir' when Fred Goodwin is not?
Oooh. This afternoon should be fun!
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...
