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Second HBOS whistleblower: Bank 'had a disregard for risk'
Hugo Duncan13 Feb 2009
A second HBOS whistleblower today claimed there was "a total disregard to the risk process" at the bank under the leadership of former chief executive Sir James Crosby.
Dr Bijan Khandani, a risk manager at HBOS between 2003 and 2005, told the Evening Standard his efforts to protect it against risk were thwarted by senior staff.
"I encountered a lot of resistance," he said. "I was amazed by this culture where there was a total disregard to the risk process."
Dr Khandani, a risk consultant at Logica, described Sir James as "a sales person" focused on growing the company.
"He would talk about the progress HBOS was making in terms of market share. Risk was not top of his priorities," he said.
HBOS, owner of Halifax, was last year rescued by the Government in an £11.5billion bailout after its near-collapse. It is part of Lloyds Banking Group, 43 per cent owned by the taxpayer.
The claims by Dr Khandani came days after evidence from original whistleblower Paul Moore led to the resignation of Sir James as deputy chairman of the Financial Services Authority, a job he took after leaving HBOS in 2006.
Mr Moore alleged he was sacked as head of risk at HBOS in 2005 after warning that Sir James was leading the bank "to the precipice" and that expansion was "going too fast".
Sir James said Mr Moore's original claims had been investigated independently at the time by KPMG and had "no substance".
But questions have been raised over Gordon Brown's judgment in appointing Sir James to the FSA and as one of his closest financial advisers given his role in the demise of HBOS.
Although Dr Khandani never met Mr Moore, he said he was shocked when Mr Moore was replaced by Jo Dawson, who had worked on the sales side of the business and had no experience in managing risk.
Dr Khandani said there was a feeling of "shock" at the move.
HBOS declined to comment.
In another twist, Mr Moore's barrister, Peter Hamilton, has written to the Treasury Select Committee to question whether KPMG's report could genuinely be regarded as independent.
Reader views (14)
I operate a financial consultancy business specialising in debt problems.
I have a number of clients who have substantial mortgages/loans well in excess of £500K in addition to large borrowings on credit cards.All of these clients are in financial difficulties but the banks are not aware of the total indebtedness to their bank. Loans of £700K with further credit card debts of £70K are not uncommon. Some have borrowed £1m putting down a deposit of £100K on a future building site which will have little value in todays climate. RBS and HBOS have had little regard for the proper lending criteria relying on credit scored decisions.
During the next twelve months I can guarantee there will be huge write offs to add to the banks' problems.
It is a disaster that the once solid and tested banking practice has been destroyed by people with little experience of the banking industry. They have been motivated by sales to achieve bonuses with little regard for longer term risk.
I understand why the directors of HBOS did not wish to be told by Mr Moore of the risk dangers.
- John Milburn, Chalfont St Peter UK, 18/02/2009 21:42
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The past managers of RBS and HBOS have no banking qualifications.
Is this not similar to me asking a painter what is wrong with my central heating, which I had installed by a joiner ?
- John J, Edinburgh, Scotland, 16/02/2009 08:26
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The Risk manager whistleblowers appear to believe they ran HBOS. Their job was simply to identify risk and bring it to the attention of the management and board of HBOS. The management and board's job was to consider the risks identified and decide if any alteration to the way the business was run was required. The fact that they may or may not have made the right decision is immaterial. What is important was that the Risk managers through their reports may have been able to influence policy but they never had any power or authority to determine the future direction of the business.
- David, Bromley, 16/02/2009 00:38
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Looks more like 'Slur Delboy Crosby' and Delboy Brrrooon a real win-double in the
HBOS Nursery Handicap.
- Kered Ybretsae, Nürnberg Germany, 15/02/2009 15:59
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Excuse me for asking but why aren't all the firms of accountants that were engaged in relation to these takeovers & mergers being held to account? Isn't an integral part of the process calld "Due Diligence"? Or isn't that "part" of the process required when the government permits the side-stepping of the Competition Commission?
After all, aren't the fat-cat firms of accountants and the government both "contributary negligent" and therefore, by definition, also "vicariously liable"?
- Fraser, Telford Park, 15/02/2009 12:45
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According to Wikipedia, Gordon Brown appointed "Sir" James Crosby as Deputy Chairman of the FSA while he was still CEO of HBOS.
http://therantingkingpenguin.blogspot.com/2009/02/what-cosy-club.html
The Penguin
- The Ranting Penguin, Wellingborough, England, 14/02/2009 10:10
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andy hornby was a child in a mans job
Lord Stephenson and james crosby should not only lose the 5 million pounds pensions,
but homes and property worth over 6 million.
they need to be investigated and sent to prison.
for starters look and james crosby the financial relationship between crosby and st james place.
- Alan Doyle, london, 14/02/2009 00:24
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In my opinion, this brings into question the financial integrity of HBOS. I get repeated mail shots from HBOS wanting me to subscribe to their financial products, but now I ask the question "Just what is it they're selling me, and is it financially sound?". I'm not a financial genius, nor do I have hundreds to invest, but if I'm asking these questions, how many other customers of HBOS are doing the same? When the Halifax was a building society, it could be trusted and respected, as could the Bank of Scotland. However, since their merger, the evil spectre of greed has parleyed with the poison of indifference to produce a bank with a reputation that is now in the sewer. The question remains: Who is going to restore this bank to greatness, trust, integrity and a reputation for reliability?
- Joannie, London, England, 13/02/2009 22:53
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Just what did these bankers get knighthoods for? Time to remove their knighthoods and nationalise these banks. After all we the "taxpayer?" are footing the bills now. Would it not have been cheaper to let HBOS and RBS go bust and then give everyone with a bank account in these banks £10,000 ? Where is this going to end? What other "nasties" are hidden?
- Jim, London, 13/02/2009 22:23
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There are very clear issues here of corporate governance and director's duties. The interesting question during the select committee hearings was when someone asked all four banksters if they had received advice on criminal negligence. Let us hope the FSA is looking into the responsibilities under law of those who failed to consider their risk obligations with due regard.
- Ken, France, 13/02/2009 18:50
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Incredible that the City was so surprised by the hidden secrets that were finally revealed by Lloyds.
The untouchables, white than white, Holier than thou
anti-heroes who lined their pockets in an outrageous way and offered a half hearted meaningless apology whilst millions of savers suffer the consequences of their corruption. How can these Bankers and FSA Officials be allowed to get away with what they have done - or not done?
- John, Edgware MIDDLESEX, 13/02/2009 18:33
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I am pleased to read that Paul Moore is being supported in his continued courageous stand against what appear to be actions by HBOS that are grossly negligent as I frankly find it a complete outrage that HBOS ex chairman's Stevenson and CEO Hornby were unable to admit to the Treasury Committee that they are personally accountable for the downfall of HBOS, given the £8bn losses by HBOS that have been declared by Lloyds today.
- Mike, london, 13/02/2009 16:13
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If the above is true, and we have two people adamant that efforts to notify of impending major risk were possibly criminally disregarded by executives, is it not now the case that all the failed/failing banks should be investigated for fraud. If found guilty, all those nice rich bankers could then be made to repay all their bonuses under the proceeds of crime. Or does good old Gordon not have the bottle for an investigation that may unearth the truth?
- Alan, Carlisle UK, 13/02/2009 15:57
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Sir James will now be given a peerage. The whistleblower will be excoriated.
- Neil M., london uk,, 13/02/2009 15:34
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