Ex-HBOS chiefs accused over risk controls

Former HBOS directors faced fresh accusations on Tuesday of ignoring warnings over its rapid growth from an ex-head of regulatory risk at the bank.

As former bosses of the UK bank and its troubled peer Royal Bank of Scotland offered up a litany of apologies to a parliamentary inquiry over the near-collapse of the banks, MPs were told that HBOS executives overlooked warnings that it was expanding too quickly and had an aggressive sales culture.

The claims – made by Paul Moore who was dismissed in 2005 – were denied at the Treasury select committee hearing by Andy Hornby, former chief executive of HBOS, and Lord Stevenson, former chairman of HBOS.

The allegations threaten to embroil Sir James Crosby, deputy chairman of the Financial Services Authority and a past adviser to Gordon Brown, prime minister. Sir James was chief executive of HBOS at the time Mr Moore was dismissed.

Lord Stevenson told the MPs that the allegations from Mr Moore had been taken “very seriously” and investigated in an independent review, the results of which had been shared with the UK financial regulator.

HBOS added last night: “HBOS refutes these allegations, which have no substance and no merit. Mr Moore was made redundant following a restructuring of a number of group functions at HBOS a number of years ago.”

However George Mudie, Labour MP for Leeds East, told Mr Hornby and Lord Stevenson: “At the end of the day, you sacked your group risk fellow. Now four years later it turns out he was right and you were wrong. You’re all in bloody denial.”

Executives from HBOS and RBS faced an intense grilling at the hearing. However, John McFall, thecommittee’s chairman, said: “They apologised for the problems but not for their part in the problems.”

The former bosses of RBS, one of the UK’s highest profile credit crunch banking casualties, also admitted that the bank’s acquisition of Dutch rival ABN Amro at the height of the boom in financial markets “a bad mistake”.

Sir Tom McKillop, former chairman said: “In retrospect we bought ABN Amro at the top of the market. So anything we paid was an error. Everything we paid, basically, has not been worth it. In fact, we are sorry we bought ABN.”

The high-profile grilling of bank executives will continue on Wednesday as Stephen Hester, the new chief executive of RBS, is questioned by MPs on whether the bank plans to pay up to £1bn of bonuses to staff. RBS also announced yesterday that it was planning to cut a further 2,300 jobs.

Lloyds Banking Group, which now owns HBOS and is 43 per cent owned by the government, is also likely to repeat its stance that it plans to pay bonuses to staff.