December 14, 2012 / 3:06 PM / 5 years ago

Ex-HBOS boss rails against "sinister" UK regulator

LONDON (Reuters) - A record fine and lifetime ban handed by Britain’s financial regulator to the former head of corporate lending at HBOS Plc was unfair and “a little bit sinister”, the former banker told lawmakers.

Peter Cummings, the head of corporate lending at HBOS until it was rescued by Lloyds, was fined 500,000 pounds ($805,000) by the Financial Services Authority (FSA) in September and given a lifetime industry ban.

“It is unfair, and it ... also seems a bit sinister,” Cummings said in a private session of a UK Parliamentary panel on banking standards, after being asked if he felt singled out as the only banking director or official acted against.

Cummings refused to blame any one individual at HBOS for its near collapse.

“I am absolutely heartbroken about what happened, and I live with it every day, but it would be inappropriate of me to point the finger at any colleague. I have not done it to the FSA, and I am certainly not going to do it to a parliamentary commission,” he said.

But he was scathing of the whole FSA process around his treatment and fine.

“Frankly, it was like living in an American soap opera. I find it bewildering, bizarre and downright impossible to believe this country has an organization that is out of control to the extent that it is. I think it is unacceptable behavior.”

The session was held in private due to Cummings’ ill health. It was held on November 27 and a transcript was released on Friday.

Cummings was slammed by the FSA for leading “a culture of optimism,” which it said affected the corporate lending division’s judgment about bad debts, and did not adequately monitor a deterioration in the value of big loans.

He rejected that. “My optimism was driven out the window when I saw people queuing up round the corner at Northern Rock,” he said, referring to that bank’s troubles in late 2007.

The fine for Cummings was a record for a senior executive for management failings and ended a three-year investigation into his role at the bank, where he headed a division which pursued aggressive growth and has been blamed for dragging HBOS near to collapse.

Lawmakers estimated Lloyds incurred losses of about 26 billion pounds on HBOS’s corporate book following the takeover.

“The level of impairment is horrendous, and indeed I accept that,” Cummings said. He blamed the high concentration of loans in commercial real estate and its private equity group.

Asked if he would run the book the same way again, he replied: “I have the benefit of hindsight, haven’t I? If I lived my life again, I would never take the chief executive’s job.”

Reporting by Steve Slater; Editing by Hans-Juergen Peters and Mark Potter

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