Banker who left HBOS needing bailout is fined £500,000

The controversial banker whose corporate loans division nearly broke HBOS, the bank made up of Halifax and Bank of Scotland, will today be fined £500,000 and banned for life from the City.

But Peter Cummings will be the only executive at HBOS to face any sanction for the bank's near collapse which was only averted after Gordon Brown's government engineered a hasty rescue by Lloyds TSB.

While the £500,000 fine is the highest yet imposed by the Financial Services Authority (FSA) for management failings it did not question his integrity. The watchdog did, however, sharply criticise his failure to "exercise due skill, care and diligence by pursuing an aggressive expansion strategy within the corporate division, without suitable controls in place to manage the associated risks" between January 2006 and March 2008. It also said he failed to "take reasonable care to ensure that the corporate division adequately and prudently managed high value transactions which showed signs of stress" in the run up to the financial crisis.

The FSA found that Mr Cummings was aware that there were significant control failings in the division and that staff were incentivised on revenue generated by big loans with little account of the risks they posed. It also failed to properly monitor loans as they went bad.

Mr Cummings aggressively expanded the corporate lending division of the bank, created from the merger of Halifax, the former building society, with Bank of Scotland. However, many of the division's big property loans started to go bad in the run up to the financial crisis, leaving HBOS scrambling to find a rescuer.

It was ultimately bought by Lloyds only after the Government tore up the existing competition laws and its purchase was a significant factor behind the multibillion pound bail out of the combined business, now called Lloyds Banking Group, which is still 41 per cent owned by the tax payer.

Mr Cummings is not expected to invoke his right to take the FSA to an independent appeals tribunal. There will be no further disciplinary actions relating to HBOS and this will clear the way for the FSA to publish its long awaited report into the near collapse of HBOS.

The bank itself was censured but not fined by the FSA on account of the bail out. The watchdog said that imposing a penalty "means the taxpayer would effectively pay twice for the same actions committed by the firm".

The FSA has faced criticism for not bringing more cases against bankers in control of the industry at the time of the financial crisis. The former HBOS chief executive Andy Hornby is still active in the City being paid more than £1m for a brief spell at Boots before moving on to run bookmaker Coral.

Mr Cummings said last night that the fact that he was the only HBOS executive to face action "defies comprehension" and that he had only opted not to appeal "with deep reluctance". He said the FSA decision had "not been reached through any fair or independent judicial process".