Anger at £1m ‘bonus for going bust’

James Crosby, former Chief Executive of Halifax Bank of Scotland
James Crosby, former Chief Executive of Halifax Bank of Scotland
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Pressure is mounting on disgraced former HBOS bosses amid anger over mammoth pension pots and nearly £1m of “bonuses for going bust”.

Seven directors of HBOS landed £914,000 in “change of control” payments triggered by the bank’s rescue takeover by Lloyds Banking Group following its £20.5bn taxpayer bailout in 2008.

It also emerged that Sir James Crosby and Andy Hornby – two of the three former HBOS chiefs damned last week by a parliamentary commission for “catastrophic failures of management” – were on pension schemes that accrued benefits at twice the rate of average workers.

Mr Hornby, eligible to start drawing down a £240,000-a-year HBOS pension when he turns 50 in four years’ time, is now in the spotlight following Sir James’s decision earlier this week to hand back 30 per cent of his £580,000-a-year pension, although he will still receive £406,000 a year.

Under the change of control payments handed out at the time of the Lloyds takeover, Mr Hornby received £251,000 cash and 7,599 shares – on top of salary, pensions awards and redundancy payments.

MPs are now demanding an inquiry into the handouts.

Bassetlaw Labour MP John Mann, a member of the Treasury Select Committee, said the due diligence done at the time of the deal needed to be investigated, while the former bosses should also pay the money back.

He said: “This is taxpayers’ money being used to pay bonuses to bankers that brought down their own bank and cost thousands of ordinary workers their jobs. These are bonuses for going bust.”

Others to receive the payments include Peter Cummings – the former head of corporate lending and the only ex-HBOS director penalised by the Financial Services Authority (FSA) after being fined £500,000 and banned for life from working in the City. He received £129,000 and 2,051 shares.

Lloyds said the decisions to award change-of-control payments and pensions were made by HBOS before its takeover.

A spokesman said: “At the time these arrangements were settled, Lloyds did not own HBOS.

“All decisions with respect to the redundancy or severance terms applicable to departing HBOS senior executives, including pensions, were made by the HBOS remuneration committee or board of HBOS prior to the acquisition by Lloyds.”

The report by the Parliamentary Commission on Banking Standards last week called for the three former directors to be barred for life from working in the City for their “toxic” misjudgments that led to the bank’s collapse.

In a humbling apology, Sir James, who lives near Harrogate, said he was giving up a third of his pension and asked to be stripped of his title which is likely to be considered by the Honours Forfeiture Committee.

He has also resigned from his advisory role at private equity firm Bridgepoint, his post as non-executive director of caterer Compass and his voluntary position as a trustee of Cancer Research UK.

Mr Hornby, who lives near Boroughbridge in North Yorkshire, has so far remained silent on his HBOS pay and perks and has been backed by current employer, bookmaker Gala Coral, where he has acted as chief executive since July 2011.

Lord Stevenson, the former chairman of HBOS who also came under particular attack in last week’s report, has yet to comment on his peerage, although he does not receive a pension from HBOS.

He infuriated the commission by claiming reckless lending at HBOS was not his fault because he was “only there part time” in the role for which he was paid £735,000 a year.