HBOS bosses to blame for bank's failure - parliamentarians

By Matt Scuffham

LONDON (Reuters) - Bailed out British lender HBOS would have failed even without the 2008 financial crisis, a panel of parliamentarians said in a report which blamed three men still in positions of influence in business and politics.

The Parliamentary Commission on Banking Standards, tasked with finding ways to reform UK banks, said HBOS was an "accident waiting to happen," with bad lending and losses across the business likely to have led to its insolvency even without the funding and liquidity problems of the financial crisis.

Although regulators bore some of the blame, primary responsibility lay with Dennis Stevenson, chairman from the formation of HBOS in 2001 until its collapse, and former chief executives James Crosby and Andy Hornby, it said on Friday.

There was a "colossal failure of senior management and the board", said Commission chairman Andrew Tyrie, a Conservative MP who expressed surprise that only Peter Cummings, who was head of corporate lending at HBOS, had so far been punished.

Cummings was fined 500,000 pounds by the Financial Services Authority (FSA) in September and banned for life from the industry.

HBOS, Britain's biggest mortgage lender, had to be rescued via a government-engineered takeover by rival Lloyds, which subsequently needed a 20-billion-pound bailout to survive.

The Commission said the regulator should consider if Stevenson, Crosby and Hornby should be barred from working within the financial services industry in the future.

Hornby, who since leaving HBOS has worked as chief executive of healthcare group Alliance Boots and is currently the boss of betting shop chain Coral, declined to comment on the report.

Crosby, a senior independent director at the world's biggest catering company Compass and an adviser to private equity firm Bridgepoint, as well as Stevenson, who sits in the upper chamber of parliament, could not be reached for comment.

HBOS was created in 2001 by a merger between Halifax, a former English building society, and the 300-year-old Bank of Scotland. It ramped up lending using cheap funding on the wholesale markets rather than safer customer deposits, and its high-risk strategy was exposed when that funding dried up following the collapse of Lehman Brothers in 2008.

HBOS's managers blamed the financial crisis for the collapse. But the Commission said the bank's business model was inherently flawed and its board was a "model of self-delusion."

"The sums would never have added up," Tyrie said.

"The Commission has estimated that, taken together, the losses incurred by the corporate, international and treasury divisions would have led to insolvency, regardless of funding and liquidity problems, had HBOS not been bailed out by both Lloyds and the taxpayer," he said.

The Commission said 25 billion pounds was lost on bad corporate loans and there were losses of 15 billion at its international business and 7 billion at its treasury unit.

Crosby was chief executive of HBOS between 2001 and 2006 before being succeeded by Hornby.

(Editing by Mark Potter)

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New British tax law won't stop corporate avoidance - parliamentarians

By Tom Bergin

LONDON (Reuters) - Legislation on tax avoidance going through Britain's parliament will not address the kinds of corporate tax minimisation that are of the greatest concern to the public, a parliamentary committee said on Wednesday.

The "General Anti-Abuse Rule" (GAAR), part of a wider finance bill, would grant Her Majesty's Revenue & Customs additional powers to counter "abusive" tax avoidance

But a sub-committee in the Lords examining the bill said GAAR would not tackle the practices used by companies such as Amazon and Starbucks to reduce their tax bill.

A Reuters report on coffee chain Starbucks last year revealed the company had paid minimal tax over a 14-year period, prompting criticism from politicians, protests at stores and boycotts by customers.

Online retailer Amazon has been criticised for channelling its European profits via an untaxed Luxembourg entity.

Tax campaigners have criticised what they see as a watering down of the draft GAAR legislation, which was initially planned to tackle "aggressive" tax avoidance, something that later became "abusive" tax avoidance.

The actions of Starbucks and Amazon - which say they file all the appropriate taxes in every country in which they operate - would likely not be deemed abusive under the proposed legislation because they take advantage of arrangements allowed by international tax rules to shift profits.

The government says while it wants businesses to pay their fair share of taxes, it is also keen that Britain should have the most business-friendly tax system in the G20.

The sub-committee agreed that the narrow focus of the GAAR was the best approach to avoid uncertainty for business.

The sub-committee said in a statement that the GAAR should be independently reviewed after five years to "ensure that it is working properly and having the appropriate deterrent effect."

It also called for an acceleration of an international review, being led by the Organisation of Economic Co-operation and Development, of how multinational companies are taxed.

The sub-committee added that separate plans, also due to be included in the finance act, to introduce a tax on residential properties worth over 2 million pounds owned by corporations - a device often used by individuals to avoid stamp duty and capital gains taxes - was excessively complex and potentially unworkable.

(Reporting by Tom Bergin; Editing by Robin Pomeroy)

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