By Simon Miller
Former HBOS director Peter Cummings has been banned from holding any senior position in a UK bank, building society, investment or insurance firm.
In addition, the Financial Services Authority has fined Cummings £500,000 - its highest ever fine imposed on a senior executive for management failings.
The FSA’s action relates to the period between January 2006 and December 2008, during which time Cummings was an executive director of HBOS and chief executive of its Corporate Division.
The FSA judged that:
between January 2006 and March 2008, Cummings failed to exercise due skill, care and diligence by pursuing an aggressive expansion strategy within the Corporate Division, without suitable controls in place to manage the associated risks; and
between April and December 2008, Cummings failed to take reasonable care to ensure that the Corporate Division adequately and prudently managed high value transactions which showed signs of stress.
The FSA found that Cummings was aware that there were significant issues with the Corporate Division’s controls, including: weaknesses in management information; staff being incentivised to focus on revenue rather than risk; and a culture which saw risk management as a constraint on the business rather than an integral part of it.
Tracey McDermott, director of enforcement and financial crime, said: "Despite being aware of the weaknesses in his division and growing problems in the economy, Cummings presided over a culture of aggressive growth without the controls in place to manage the risks associated with that strategy. Instead of reacting to the worsening environment, he raised his targets as other banks pulled out of the same markets."
She added: "It is essential that 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."