For a Dumbarton schoolboy who began work as a trainee making the tea at a High Street branch of Bank of Scotland, Peter Cummings certainly came to acquire a taste for the good life.

As chief executive of HBOS Corporate Banking, a post he held until last month, his main office was in Edinburgh at the bank's headquarters on The Mound. Yet 53-year-old Cummings, a BOS lifer, listed his clubs in Who's Who as Mark's and George - two of the suavest private dining spots in Mayfair. The message was clear: the top rainmaker from HBOS had ambitions as a player far beyond Scotland.

Cummings' stellar client list also spoke volumes: Sir Philip Green, Sir Tom Hunter, the Reuben brothers, the Barclay brothers, Robert and Vincent Tchenguiz. Some of them saw him as a kindred spirit: an outsider willing to shake things up, a man ready to do deals on a handshake.

He is straightforward, if a little prickly. Stocky, around 5ft 6ins, he got married in his early twenties to Margaret, a teacher. He is a Celtic fan and passionate supporter of the Maggie's Centre cancer charity. A risk-taker, too. He loves scuba-diving in exotic locations from Scapa Flow to the Sudan. "I've been diving for 20-odd years and I've experienced some real virgin stuff, 'BT' - before tourists," he enthuses.

HBOS came to love that appetite for risk. His then boss, Sir James Crosby, promoted him to run corporate banking in 2006. Cummings became the best-paid director on the board, earning £2.6 million in salary and bonus in the most recent annual accounts.

He specialised not just in lending cash to clients but also in taking an equity stake in their businesses, chiefly commercial property. It is this model, pioneered by Cummings, which is now blamed for HBOS's current troubles. The bank has been torn in the downturn as it is both a lender worried about its cash and a co-investor trying to preserve its investment. Few other banks pushed the model as hard as he did.

Some rivals did raise eyebrows during the boom. But at the peak his division was generating as much as 40% of HBOS's profits. "They were in awe of him," says one observer. The HBOS remuneration committee was so grateful it gave him an "additional incentive opportunity", which meant he alone could earn up to 200% of salary as a bonus in 2007 and 2008.

Now everything has changed. Cummings had to step down last month along with fellow HBOS directors after the Lloyds takeover. He was entitled to a year's salary in lieu of notice and had a £5.97 million pension pot.

But the unscheduled announcement last Friday that the bank was going to write off £10 billion, on top of earlier losses, raised the stakes dramatically. There is talk of Lloyds needing more Government funding or even full nationalisation. Another option is hiving off the toxic assets, many acquired by Cummings, into a new "bad bank". No wonder he is the latest banker to find himself in the Westminster crosshairs. He has reportedly gone into hiding, and friends say he is devastated.

Sir Philip Green, speaking from New York Fashion Week, remains an ally: "It's easy target practice and I am very sad he is being treated in this way. Peter was always hugely efficient. Through all my dealings with Peter and HBOS, it was an old-style banking relationship. I had a very successful run with them."

Cummings and Green first got to know each other in 1995. Sir Tom Hunter, the Scottish entrepreneur, introduced them when they worked on the takeover of Olympus Sports. Cummings, who had already done an MBA, had just become director of corporate banking. He was not alone in pushing the idea of being lender and equity investor. Clydesdale Bank was taking a similar approach under another ambitious Scot called Fred Goodwin (who later jumped to Royal Bank of Scotland).

Cummings explained: "We are interested in asset-backed companies like housebuilders. It is areas like these which are not of significant interest to the venture capitalists." A specialist in-house department, Uberior, handled the equity stakes. Uberior is Latin for "much more plentiful".

His deals started to catch attention. First was a 50-50 joint venture, worth £110 million, to launch the City Inn chain in 1998. A year later, he was the sole outside partner for what was then Scotland's largest management buyout, the £93 million purchase of land-management firm CALA.

More followed with Sir Rocco Forte's RF Hotels (£70 million in equity and £200 million in loans) and the Barclays brothers' purchase of Littlewoods for £750 million (Cummings took 5% equity and arranged the financing). "These are large businesses that have been around for a long time," he said. "There will be good times, there will be bad times. We are not here to make a quick buck."

Then came his biggest deal yet with Green's purchase of Topshop owner Arcadia in 2002. Cummings provided the entire working capital of £950 million and took an 8% equity stake.

Some observers fretted that the strategy was too "aggressive". By 2003, analysts at Citigroup estimated the HBOS corporate lending book was growing at over 20% a year - compared with an average of around 14% at other banks.

Yet HBOS didn't have to worry. Green repaid the main loan within two years. Cummings could crow: "A £1 million equity investment has become a £100 million dividend."

By now Cummings was being fêted as a "banker to the stars", though he insisted he wanted to remain "low-profile". These were heady times. He and Green launched an audacious but unsuccessful bid for Marks & Spencer. And he more than doubled HBOS's money on a stake in New Star Asset Management. There was even talk of him replacing Crosby as chief executive, but that job went to Andy Hornby in 2006.

So where did it all go wrong? It is clear his mistake was not to rein in investments as the market peaked. He claimed last year: "From 2001 to 2003, we increased our property book, but in mid-2006 slowed the growth in our lending because we saw the road ahead."

But that was not enough. Among his worst deals was the 50-50 acquisition of housebuilder McCarthy & Stone, with Tom Hunter, in 2006 for £1.1 billion. The value of the investment has slumped, and McCarthy & Stone broke loan covenants. Other acquisitions are groaning under debt: housebuilder Crest Nicholson and garden centres chain Wyevale. There were other big loans to Baugur, Gala Coral and Smurfit Kappa.

Friends of Cummings are unconvinced the losses will be as bad as the £7 billion Lloyds fears. "The auditors are being savage but no one knows the valuations because there is no market," says Green.

Asked for his tips on the property market last year, Cummings had this to say: "Stick to the fundamentals. This is the age of the property person, not the financial engineer."

But the uncomfortable truth is he failed to heed his own advice.