The senior banker blamed for the crisis at HBOS came under fresh attack today as it emerged that he is in line for a ‘scandalous’ pension of more than half a million pounds a year.
Sir James Crosby, who was forced to quit as a City regulator last week, is due to get an annual income of £572,000 after building up a pension pot of £10.4m. The Liberal Democrats today urged Sir James to forgo the payout, given the crisis the bank now faces.
The proposed pay-out will cause further embarrassment to the newly created Lloyds Banking Group, which took over HBOS this year.
Taxpayers currently own 43% of Lloyds and HBOS and Chancellor Alistair Darling is expected by many to further nationalise the bank amid plunging share prices. The bumper pension, the details of which are buried in HBOS’s annual report published last week, heaps further pressure on to Sir James.
He resigned as deputy chairman of the Financial Services Authority after claims that he sacked a whistleblower who warned the bank that it was expanding too fast.
Sir James was chief executive of the merged Halifax and Bank of Scotland, overseeing its muchcriticised reliance on wholesale credit markets. He left the firm in 2006 and successor Andy Hornby was in charge as the bank came close to collapse last year when worldwide credit dried up.
As the Standard revealed Sir James’s pension deal today, Lib-Dem Treasury spokesman Vince Cable said it was proof of the ‘outrageous’ payments overseen by HBOS. ‘This just confirms the stench that is emerging from this completely failed and badly-run bank over which he presided for years,’ Mr Cable said.
‘Taxpayers and HBOS shareholders have suffered so grievously at his hands that I think he does have a moral obligation to repay some of the scandalously overgenerous payments he has received.’ Mr Cable added that a ‘further insult’ to taxpayers was that Sir James would have had full top-rate tax relief on his pension contributions.
Sir James joined the Halifax when it was a building society and became chief executive in 1999, leading the merger with Bank of Scotland in 2001 and pushing its rapid growth from then on.
When he stood down from HBOS he was earning £858,000 and collected bonuses of £2,147,000 between 2002 and 2006. The bank’s annual reports show he will earn a pension of £572,000 a year from a pension pot which was worth £10.4m at the end of 2006.
Sir James, who left HBOS in 2006 aged 50, insisted last week that there was ‘no substance’ to the allegations made by whistleblower Paul Moore. He said he was resigning from the FSA because he did not want to make the regulator’s task more difficult.
A spokeswoman for Lloyds confirmed that Sir James’s pension would be £572.000 a year. His successor, 42-year-old Mr Hornby, is in line for a pension of £184,000 a year from a pension pot of £2m.
Former HBOS chief: My successors ‘got greedy’
Sir Peter Burt, former chief executive of Bank of Scotland, today accused his successors at HBOS, which had to be taken over by Lloyds TSB last month, of being ‘greedy’.
Burt was one of the key architects of the merger of former building society Halifax with his own Bank of Scotland to create HBOS in 2001. He stayed on as deputy chairman of the enlarged group for another two years.
Today he told the Herald newspaper the latest banking-industry crisis is ‘a storm in a teacup’. He described the furore over potential losses of £11bn for HBOS as more ‘an opportunity to kick the Prime Minister and kick bankers’ than as indicating fundamental problems.
Despite his words, Lloyds shares fell again today, down 3.8p to 52.6p, after further downgradings by City analysts. Credit Suisse slashed its share-price target from 90p to 55p.
Burt admitted that Bank of Scotland had, at the time of the merger, been ‘overly dependent on wholesale money, and that is why Halifax was such a good deal.’
‘In those days Halifax was a well run organisation with a huge savings deposit situation,’ he said. ‘Wholesale funding was relatively low.’
Halifax then got 85% of its lending from savers, while BoS was about 53% self-funded. Burt said the merged bank grew its balance sheet from £400bn in 2003 to £666bn in 2007.
He commented: ‘Obviously they didn’t manage to keep the ratios where they were at the time of the merger. They got it wrong. They just got greedy.’
Last year Burt failed in his bid – alongside fellow Scottish banker Sir George Matthewson – to prevent the Lloyds TSB deal and take over HBOS themselves.
Lloyds and HBOS received £17bn in bailout funding from the Government, but ministers have been keen to play down suggestions that the merged bank could be fully nationalised. At the moment the taxpayer owns 43% of Lloyds Banking Group.
Paul Waugh, Evening Standard
17 February 2009, 2:05pm
Source: The Evening Standard