hbos director fined half a million

Former chief executive of HBOS corporate division, Peter Cummings, has been fined £500,000 by the FSA and banned from holding a senior position in any UK financial services firm.

hbos director fined half a million


The action was taken by the regulator for management failings by Cummings in the period immediately before and in the peak of the financial crisis.

The FSA judged that between January 2006 and March 2008 Cummings failed to exercise due skill, care and diligence (principle 6 of the FSA’s Code of Practice for Approved Persons) by pursuing an aggressive expansion strategy within his division.

He also failed to put suitable controls in place to manage associated risks and between April and December 2008 failed to take reasonable care to ensure the corporate division adequately and prudently managed high value transactions which showed signs of stress.

Unde Cummings’ watch staff were incentivised to focus on revenue rather than risk and the chief executive fostered a culture which viewed risk management as a constraint on the business rather than an integral part of it.

‘Optimistic’ leadership 

HBOS’ corporate division was said to have pursued an aggressive growth strategy despite known weaknesses in its control framework and Cummings chose to ignore warning signs from within the bank and those concerning the wider state of the economy.

One example of his hubris was Cummings’ direction of his division to increase its market share as other lenders pulled out of deals. The regulator characterised his leadership as optimistic rather than prudent.

Tracey McDermott, director of enforcement and financial crime, said: "It is essential senior executives understand that incentivising revenue over risk is a dangerous folly. Growth is a sound ambition for any business but risk must be properly managed and robust controls are imperative to ensure growth is achieved in a way that is both stable and sustainable."

The FSA also issued an update on a report into the failure of HBOS, which it had been unable to commence until the conclusion of enforcement proceedings such as that against Cummings.

The regulator said its publication of the final notice in Cummings’ case meant it could now start work on an HBOS report to explain why the bank failed.



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