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Ex-HBOS Banker Cummings Fined $805,000 by U.K. Regulator

The U.K.’s financial regulator fined Peter Cummings, a former banker at HBOS Plc, 500,000 pounds ($806,000) over the aggressive expansion of corporate lending.

The Financial Services Authority fined and banned Cummings for failing to adequately manage the risks his division faced as financial market conditions deteriorated in 2007 and 2008, the agency said in an e-mailed statement yesterday.

“It is essential that senior executives understand that incentivizing revenue over risk is a dangerous folly,” Tracey McDermott, the FSA’s director of enforcement, said in the statement.

Cummings, HBOS’s highest-paid banker, ran the corporate- banking unit before the Edinburgh-based lender was acquired by Lloyds Banking Group Plc. (LLOY) Cummings’ unit had “lent too much,” ex-HBOS chairman Dennis Stevenson said at a Parliamentary committee hearing in 2009. HBOS’s assets more than doubled to 681 billion pounds between 2001 and 2008, as it expanded lending to entrepreneurs and real estate developers.

About 40 percent of the bank’s 117 billion-pound corporate loan book was allocated to real estate and commercial property. Lloyds’s acquisition of HBOS, Britain’s biggest mortgage lender at the time, led it to seek a 20 billion-pound bailout. The U.K. government acquired a 43.4 percent stake in Lloyds.

Cummings, 57, rejected the FSA’s claims, calling the investigation process “Orwellian” and said in an e-mailed statement that there should be “collective responsibility” for what happened at HBOS. So far, he’s the only HBOS director to face action from the FSA over the near-collapse of the lender.

‘Institutional Oppression’

“The decision to single me out for investigation is even more grotesque given that even the FSA has to admit in its notice that other senior people were involved in the critical decisions for which I am taken to task,” Cummings said. “This is tokenism at its most sinister, and has made it feel throughout like institutional oppression.”

Andy Hornby, the chief executive officer who led HBOS before the bailout, was named CEO of Alliance Boots Holdings Ltd. in 2009. He’s now head of British bookmaker Gala Coral Group Ltd.’s Coral unit.

Cummings said he won’t appeal the FSA’s decision, citing the potential costs. The FSA said it will now begin work on a detailed report into the causes of the failure of HBOS in 2008, similar to its earlier report into the collapse of Royal Bank of Scotland Group Plc in December.

Andrew Tyrie, the Conservative chairman of the U.K.’s Treasury Committee, said the panel would appoint independent advisers to oversee the preparation of the report.

“The public deserves to know exactly what happened at HBOS,’’ Tyrie said in a letter to the FSA. “The Treasury Committee will ensure that this happens.”

welcome a ‘‘comprehensive’’ report in a letter to FSA Chairman Adair Turner today.

To contact the reporters on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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