UK Bank Chiefs Slated as ‘Brash’ and ‘Deluded’

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Bank chiefs at HBOS, one of Britain's biggest banks before it was taken-over by Lloyds and subsequently bailed out by taxpayers, were condemned as a "model of self-delusion," in a damming report by Britain's Banking Standards Commission on Friday.

"The HBOS story is one of catastrophic failures of management, governance and regulatory oversight," wrote Conservative member of parliament (MP) Andrew Tyrie, who chairs the commission.

The report which gives a detailed account of what went wrong at HBOS, based on interviews with former executives, says HBOS lost a total of around 30 billion pounds ($45 billion) in the three year period between its near-collapse during the credit crisis, to its bailout by the British taxpayer.

Tyrie and his co-writers blamed the huge loss on HBOS's "brash" culture, with executives pursuing an overly aggressive growth strategy and taking on risks they did not fully understand.

"This culture was brash, underpinned by a belief that the growing market share was due to a special set of skills which HBOS possessed… There was insufficient banking expertise among HBOS's top management. In consequence, they were incapable of even understanding the risks that some elements of the business were running, let alone managing them," said Tyrie.

"The effects of the culture were all the more corrosive when coupled with a lack of corporate self-knowledge at the top of the organization, enabling the bank's leaders to persist in the belief , in some cases to this day that HBOS was a conservative institution, when in fact it was the very opposite," he added.

Tyrie also panned the Financial Services Authority's (FSA) regulation of HBOS as "thoroughly inadequate" and called on the body to consider banning three of HBOS's leaders from ever working again in finance. So far, only Peter Cummings, the former head of the corporate banking division, has received a fine and ban.

"It is unsatisfactory that the FSA appears to have taken no steps to establish whether the former leaders of HBOS are fit and proper persons to hold the Approved Persons status elsewhere in the U.K. financial status," wrote Tyrie. The FSA was replaced by the Financial Conduct Authority and Prudential Regulation Authority at the start of this month.

Britain is in the midst of a substantial shake-up of its banking regulation, in the wake of public controversy over the 65 billion pounds ($102 billion) of public money used to shore up Lloyds Banking Group and Royal Bank of Scotland.

(Read More: UK to Separate High Street Banks From City Traders)

The commission's report is the fourth in a series by the Banking Commission aimed at highlighting the causes of the U.K. banking crisis. The commission comprises of members of parliament from across the three main parties, plus well-known peers such as Justin Welby, the new Archbishop of Canterbury.

On Wednesday, the commission published an open letter to the FSA, requesting a response to its previous report on proprietary trading, which it described as "not a suitable activity for U.K.-headquartered banks to engage in."

(Read More: RBS Faces $6 Billion Investor Action)

--By CNBC's Katy Barnato