Losses at HBOS underestimated by as much as £10bn

Calls are growing for the bank's former bosses, Sir James Crosby and Lord Stevenson, to be stripped of their titles

Click to follow
The Independent Online

HBOS losses have been underestimated by "billions", according to the man who famously blew the whistle on the failed bank's overly aggressive risk-taking culture. Paul Moore added to the chorus of criticism demanding that Sir James Crosby, the former HBOS chief executive, and Lord Stevenson, chairman of the bank when it was rescued by Lloyds in September 2008, be stripped of their honorific titles.

A Treasury Select Committee source also said the gongs should be "removed" in the wake of a damning Parliamentary Commission on Banking Standards report last week that put the blame for HBOS's collapse squarely on the pair as well as Sir James's successor, Andy Hornby.

However, Mr Moore, who was sacked as head of group regulatory risk at HBOS in 2004 after warning that the bank would eventually find itself in terrible trouble, argued that the report failed to show just how bad the bank's losses have been.

The committee estimated that loans dished out by HBOS's corporate division caused losses of about £25bn between 2008 and 2011. But this did not include the division's investments in businesses and shares of joint ventures that have also struggled so badly in the financial crisis.

Mr Moore said: "We don't know the exact number – that would be very difficult to find – but those of us who watch these things think [the additional losses on these investments] would run into the billions. We need to know."

A banking industry source suggested that this figure could be as high as £10bn, though the way that Lloyds reorganised HBOS's divisions after saving the group means that the commission had to estimate losses.

Mr Moore said that Lord Stevenson and Sir James should "examine their consciences and apologise for what they have done" as this would be "cathartic" for wider society. As a result of taking on HBOS's rotten businesses, Lloyds had to be bailed out by the taxpayer.

Mr Moore added: "In the past I've always said that Crosby should be put in front of an investigation, a tribunal, and lose his knighthood when found guilty. This report has been a tribunal and it has reached a firm conclusion on the back of some really excellent evidence.

"Therefore, he has been found guilty and he should voluntarily give up his knighthood for financial services. Lord Stevenson should give up his peerage. Their actions have caused the misery of literally millions of people."

The Treasury Select Committee source added there was "a staggering lack of competence" and that politicians should be taken out of the process of awarding the country's highest honours. The source added: "Gongs can be removed. It's not easy, but it is what should happen in this case."

Mr Moore said that the punishments for the "HBOS trio" should include class-action lawsuits for breach of fiduciary duty, unlimited fines, and bans on holding directorships. Sir James, whom the commission called the "architect of the strategy that set the course for disaster", has already since quit an advisory role at Bridgepoint, the private equity group that owns Pret a Manger and Leeds-Bradford Airport.

Mr Hornby is also facing pressure to leave his role as chief executive at bookmaker Coral. Although he is widely said to be doing a good job, City analysts argue Mr Hornby's presence would undermine the company should the bookie go through with plans to sell shares on the London Stock Exchange.

Mr Hornby said yesterday that the situation with the commission's findings "is what it is", but declined to comment further. However, it is understood that he believes that the commission has incorrectly calculated the figures on writedowns and impairments in HBOS's three core divisions, meaning that the trio have been condemned by wildly inflated figures. As well as the £25bn estimated in the corporate division, the commission said that there were £15bn of losses in its international work and £7bn in retail, which includes mortgages. That places a total of nearly £50bn in writedowns and impairments for 2008-11, the time when the banks found themselves hardest hit by the crisis that has so devastated the world economy.

The Government is waiting for shares in Lloyds and Royal Bank of Scotland to reach a level that would mean taxpayers would at least get back the tens of billions that were needed for the institutions to survive. However, the state's shares in Lloyds are still worth about £5bn less than the amount ministers poured into the bank.

HBOS was formed out of a merger of Halifax and Bank of Scotland in 2001. The merged group then pursued an aggressive growth strategy Mr Moore warned was too risky, which was ignored until he told the world in late 2008. Lloyds Bank declined to comment yesterday.