Why HBOS’s Cummings should hand back his rewards for failure

PETER Cummings, former head of corporate lending at HBOS, is the archetypal ‘fat bloke’ banker.

He was handed an astonishing £660,000 pay-off on leaving the bank he helped to destroy in January 2009. Worse, the Dumbarton and Marbella resident was also, according to this Daily Telegraph article , awarded an annual pension of £344,000 per year for life. This came on top of the £2.3m that Cummings, officially “earned” at HBOS in 2007.

These rewards for failure are a disgrace considering the damage Cummings as wreaked, especially when you consider that neither HBOS nor these perks would exist today were it not for taxpayers’ munificence. Cummings’s payoff and pension are, if anything, more egregious than the pension handed to former RBS chief executive Sir Fred Goodwin. But to date they have generated much less media and political outrage.

Why was someone whose reckless lending practices have cost the UK taxpayer countless billions permitted to walk away from the wreckage of the HBOS car crash with so much booty?

Remember it was Cummings who famously remarked in February 2008: “Some people look as though they are losing their nerve — beginning to panic, even — in today’s testing real estate environment. Not us.”

He continued to pile billions of pounds into property ventures, both through buying equity stakes and lending, even as more sensible banking executives were battening down the hatches.

And why has Gordon Brown’s government been so quiet about this scandal, given it was so eager to demonize and even scapegoat Royal Bank of Scotland’s former boss Fred “the Shred”  last spring? Also why are some of the high-profile “entrepreneurs” to whom Cummings so generously lent so eager to try and defend Cummings?

The answer is simple. Brown, and presumably most of the aforementioned “entrepreneurs”, are up to their necks in the HBOS / Lloyds scandal.

Not only is Gordon Brown a close friend of former HBOS chief executive, Sir James Crosby (to whom the then chancellor handed a job the FSA in January 2004, after which HBOS became virtually unregulated), but despite what seems to have been his clear knowledge of the severity of HBOS’s problems,  Brown foisted the basket-case bank on the hapless Lloyds TSB in September 2008. (By the way it was Crosby, as HBOS’s CEO between September 2001 and June 2006, who inculcated the free-wheeling, sales-mad culture at the bank, and who gave Cummings free rein to do as he chose with the corporate division).

Brown seems to have had no qualms about keeping his “friend” Sir Victor Blank, former chairman of Lloyds TSB, in the dark about the horrors on the HBOS’s balance sheet. For example, it has been documented that Brown was alerted to the alleged £1bn Bank of Scotland Reading fraud, which occurred on Cummings’s watch, and which about which Cummings is understood to have been fully aware, in October 2008. Yet Brown appears to have decided the matter would be of no interest to Blank.

Further reading:-

• Bewildering flights of fancy, by Patrick Hosking, 27 Feb 2010
• Doorstepping Cumming’s Dumbarton bungalow, by Douglas Fraser (49 minutes into recording) 27 Feb 2010
• Banks facing commercial property meltdown, BBC Radio 4 “File on 4” , 9 Feb 2010
• The Recklessness of Cummings, by Ian Fraser, 13 July 2009
• Examining HBOS, by Ian Fraser, 9 June 2009
  

This blog post was published on 27 February 2010