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on 2 March 2017
A well written, exciting and at times shocking book on the rise and sudden fall of HBOS. Clearly the author knows his stuff.
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TOP 1000 REVIEWERon 31 December 2012
Experienced financial journalist Ray Pearman's well researched, informative, interesting and erudite account of the supposed 'merger' of The Halifax Building Society and The Bank of Scotland, gives a succinct summary of the history of both companies, a detailed account of the getting together, and the disasterous but wholly avoidable stampede into bankruptcy, followed by a very thoughtful analysis of what went wrong and how the most basic of well established elementary banking and commercial principles would have avoided the collapse which cost the taxpayers dearly.

Immediately the 'merger' was consumated the direction and running of HBOS was dominated by the men from Yorkshire, who were compared to the religious fanatics of Afganistan - 'The Haliban', and led by Andy Hornby, a marketing whizz-kid from the supermarket chain Asda, who swamped the combined company with a 'tsunami' of a vastly increased portfolio of riskier mortgages, big ticket business loans , and poorly adjudged commercial property lending, financed in the large part by securitizations, and short term borrowings. Even at the start of 2008 when the property market was imploding worldwide, HBOS buried it's head in tha sand and publicly announced "Some people look as though they are losing their nerve - beginning to panic even - in today's testing property environment. Not us". It was soon seen as a highly reckless and irresponsible delusory statement but was indicative of the almost total lack of understanding of the gravity of the situation the bank had manoeuvred itself into. Despite falling profits and horrendously massive bad debts looming ahead pay and bonuses for the top executives escalated upwards.

Forced to improve it's capital base in accordance with Basel II regulatory requirements in July 2008 HBOS launched a rights issue which in a move that the underwriters would live to regret, was the biggest flop since the stock market crash of 1987 with less than 9% taken up, leaving the underwriters to take over a 90% paper loss. The end of HBOS came soon after when a hasty, devoid of proper due diligence procedures, take-over by Lloyds was forced through by the Government and for which Lloyds is still counting the costs and losses. Lloyds failed to spot the level of toxicity in HBOS's book and for a time it looked as if they might have blown up two banks instead of one.

HBOS's demise was caused by a fundamental breakdown in basic commonsense. If money is lent to people with no jobs, no provable income and no assets combined with lending money to buy an asset which is worth the same or even less than the amount of the loan, then those responsible must be pretty much close to delusional or stupid or both. You simply don't need to be an economic rocket scientist or mathmatical financial risk management specialist to know that this is not the way to build up a book of debt. This together with funding the whole operation with largely short term money bearing no relationship to the average length of the loan book, and an almost total lack of proper internal governance, was a lethal highly toxic mix guaranteed to bring down the house of cards.

Within 7 years of the merger the Bank of Scotland was destroyed, by the focussing on only growth with common sense and everything else subordinated, with the result of the losing sight of the incredibly simple rules of banking, which had not changed since it's inception in 1695.

A highly recommended, difficult to put down read.
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on 11 April 2013
This starts slowly with the history of Bank of Scotland but actually it is a clever way of capturing the importance of Bank of Scotland to Britain. I can't help wondering if the writer had a strong relationship with the Scottish bank as it does come out of the story far more favorably than Halifax. But definitely worth reading if you are interested in tales of the credit crunch.
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on 17 March 2017
Straightforward account of what happened, but nothing new and all very much what we already know.
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on 5 August 2017
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A good read but not as good as comparable books about RBS and Lloyds
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on 13 December 2013
I don't normally read this sort of book, but as an ex-HBOS employee of ten years, including the period of near-bankruptcy in late 2008, I was interested to know exactly how the collapse was brought about. I worked in one of the call centres dealing only with personal customers, light-years from the world of nine- and ten-figure corporate finance deals, but many of the root causes of the destruction of HBOS were visible even from my insignificant position within the company hierarchy. None of these issues are particular to HBOS, either. They are symptoms of the degradation of the banking industry over the last few decades. Genuine customer knowledge and understanding has been replaced by box-ticking; a sensibly conservative attitude to lending has been replaced by a culture of hucksterism where quantity of sales is the sole measure of success, quality being little more than an afterthought; and long-term stability has been sacrificed on the altar of short-term profits and the annual bonus payment. I left the company [now part of Lloyds Banking Group] in February of this year (2013), and I'd like to say it appeared that the company had learned its lesson, but sadly I cannot. If anything, the period after integration into Lloyds was characterised by an even stronger focus on sales, as if the company believes it can claw back the billions it lost to the toxic debts of HBOS by employing the same sales strategy that allowed those poisonous loans to be made in the first place. I fear that another serious banking crash may not be very far away.
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on 14 June 2014
There have been three very informative books on the demise of RBS and HBOS, all of which merit close reading. They go some way to providing detail on how provincial banks embarked on aggressive growth, abandoned their customer raison d'être, provided platforms for massive rewards based on what are now known to have been illusory profits, and for some time were applauded for doing so by shareholders and governments of the day. The folly and recklessness are now all too apparent and whilst the RBS versus HBOS circumstances had unique characteristics (HBOS did not have an embedded investment bank), the parallels of rash lending to poor credit on inflated values, with paper thin equity to support the risks taken and over reliance on wholesale financing markets, become clear. Ray Perman has provided excellent coverage of how what at one time would have been regarded as a very secure lending and deposit taking institution was sacrificed in a decade to 'stack em high, sell em cheap' approach to banking, all the more disturbing in many respects as there wasn't even a rash of corporate acquisitions to blame it all on, as there was for RBS.
Perman has avoided subjective judgement and allowed the facts to tell their own story, which does not make pretty reading for those involved, not least as one suspects that Perman, as an outsider, could not possibly have been given access to 'some of the stuff that must have gone on'. Should be recommended reading for anyone in the banking industry.
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on 10 December 2012
Frankly I did not expect to enjoy this book but it was well written and tried to clearly explain what went wrong with HBOS. It is a hugely complex, technical area which Perman succeeds in many ways to explain to the non-banker but it leaves a 'nasty taste in the mouth'. Greed and meaningless, delusional reports judged on their size rather than their accuracy or clarity seem to prevail at all management tiers in HBOS creating muddle. Leaving ample opportunity for those at the top to reward themselves with even bigger remuneration.
Unfortunately though our technological age has many advantages, the ability to complicate reports to make them effectively to dull to comprehend is a problem. It was a problem apparantly happily embraced by HBOS not just for clients and toothless regulators but also for management It is a problem which shows no sign of disappearing. I am left wondering whether banking in the way we know it has any future? I am also left wondering if people exist with honesty, integrity, banking ability who are not shockingly greedy?
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on 28 December 2012
This book gave a concise account of the origins of Bank of Scotland ( BoS) -and its development ( warts and all) during the 1980s. Whilst excoriating the Chairman and Board of the merged BoS and Halifax--long before the Parliamentary Committee did-- it makes clear that the fundamental problems existed within all UK banks --so the sub title 'Best Bank in UK' could not be appled to BoS.
It also makes clear that Peter Cummings was the fall guy for the acts of others.
Have passed it on to my daughter with the instruction '-read-understand and apply the lessons'
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