It probably won’t ease the anger many people have toward bankers, but at least James Crosby is showing more contrition than other executives who ran their banks into the ground during the financial crisis.
Sir James, who headed HBOS, which was once one of Britain’s largest banks, is giving up 30 per cent of his indexed pension, quitting his job with a private-equity firm and handing back his knighthood, something no one has done before.
“In view of what has happened subsequently to HBOS, I believe that it is right that I should now ask the appropriate authorities to take the necessary steps for [the knighthood’s] removal,” Sir James said in a statement Tuesday.
While Sir James’s actions won praise from the British government, which called it the “right decision,” others have been less impressed, saying he will still receive a hefty pension – the equivalent of about $600,000 annually – and that far tougher sanctions are needed for those who ran failed banks. There have already been calls by members of Parliament to ban Sir James and others for life from any role in the financial sector and suggestions more pension money should be clawed back.
“It’s a very positive sign if others follow suit,” said John Mann, a Labour MP and member of a parliamentary committee that investigated the HBOS debacle. “This is the start, not the finish of things. I think there is a lot more to go and I think it ought to apply to others as well.”
Added Conservative MP Mark Garnier: “What we can’t do is allow this gesture to detract us away from the core fundamental point, which is that the regulator has got to be holding people personally accountable for their actions.”
Sir James, 57, has become a target for the seemingly unquenchable fury at bad bankers. Last week, a report by a committee of MPs and members of the House of Lords sharply criticized the former CEO, who won the top job in 2001 when HBOS was created through the merger of the Bank of Scotland and Halifax bank.
The report blamed him for a reckless expansion plan that led the bank to take on billions of dollars in risky mortgages and move into Ireland and Australia where it lost more than $20-billion. At its peak in 2007, the bank was worth roughly $60-billion, but nearly all of that has been wiped out. Sir James was the “architect of the strategy that set the course for disaster,” the report said, adding that his actions amounted to a “colossal failure.”
Sir James stepped down in 2006, just months before the bank came crashing down. It ended up being acquired by Lloyds Banking Group but still required nearly $50-billion in government bailouts. Upon his departure, Sir James received a pension worth more than $1-million annually, cashed out millions of dollars in bank shares and was knighted.
The committee’s report also blamed Andy Hornby, who followed Sir James as CEO, and former chairman Dennis Stevenson for making things worse and recommended that they also be banned for life from the financial sector.
Sir James has apologized for his conduct, saying in a statement: “I am deeply sorry for what happened at HBOS and the ensuing consequences for former colleagues, shareholders, taxpayers and society in general.”
The U.K.’s Honour Forfeiture Committee, which handles the repeal of honours, will review his request to drop the knighthood. He won’t be the first banker to lose the title. Last year, Fred Goodwin, the former head of Royal Bank of Scotland, had his knighthood revoked and also lost part of his pension.