FSA hands life ban to HBOS director Peter Cummings

FSA hands life ban to HBOS director Peter Cummings


The action against HBOS’s former head of corporate banking is the most draconian to be imposed against a senior figure at any of the banks that were bailed out during the financial crisis.
Mr Cummings has been widely held to be responsible for the lending that led to a multi-billion pound bailout of the bank and then it being taken over by Lloyds Banking Group.
In its report into HBOS’s near collapse, the Financial Services Authority concluded the bank was guilty of “very serious misconduct”. It also found the corporate division was the “highest risk part” of the bank.
The City watchdog decided to waive what could have been a £50m to £100m fine against the bank to save the taxpayer further expense. Following Lloyds’ takeover of HBOS the bank is 43pc owned by the taxpayer.
Tracey McDermott, director of enforcement and financial crime at the FSA, said: “Despite being aware of the weaknesses in his division and growing problems in the economy, Cummings presided over a culture of aggressive growth without the controls in place to manage the risks associated with that strategy. Instead of reacting to the worsening environment, he raised his targets as other banks pulled out of the same markets."

Mr Cummings' punishment puts him in a select position. He is one of the only bankers from one of the bailed out banks to have been fined in relation to misconduct leading up to the financial crisis. Only he and former RBS director Johnny Cameron have received bans. The FSA said the fine levied against Mr Cummings means all current investigations connected to the bank are concluded.
However, chief executive of the FSA, Hector Sants, has publicly stated that other prominent bankers from the period, such as former RBS chief executive Fred Goodwin, would not be allowed to work in regulated positions again.
Mr Cummings' punishment comes six months after the FSA published its intial report into failings at HBOS.
In it, the FSA said: “The corporate division pursued an aggressive growth strategy, the effect of which was to increase the risk profile of a business which was already focused on high-risk, sub-investment grade lending.
"Corporate did so despite known weaknesses in the control framework, which meant that it failed to provide robust oversight and challenge to the business.”
In a statement Mr Cummings said he rejected the FSA's findings but would not be appealing the fine.
He said: "Many people must bear collective responsibility for what happened, including governments and regulators as well as the boards of the banks themselves. But the fact that I am the only individual from HBOS to face investigation defies comprehension.
"The decision to single me out for investigation is even more grotesque given that even the FSA has to admit in its notice that other senior people were involved in the critical decisions for which I am taken to task. This is tokenism at its most sinister, and has made it feel throughout like institutional oppression."