Eric Daniels: Lloyds chief who made one deal too many

Eric Daniels counted himself lucky when he landed the top job at Lloyds TSB after a lengthy stint at Citigroup, much of it spent negotiating with the fearsome juntas of Chile and Argentina. The years of Latino turmoil left their mark: "Paranoia is a permanent state," he told The Daily Telegraph. But he must have felt that was behind him in 2003 when he settled into Lloyds and prepared to give his conservative instincts free rein. While racier peers ran amok, he built Lloyds into arguably the world's dullest bank.

By British banking standards, Daniels has an exotic background: his father was a German academic, his mother Chinese, his wife is Panamanian, and he was raised on the plains of Montana. In a different life, says The Scotsman, noting the laidback Midwestern drawl, "he could have been a character in a spaghetti western". Daniels loved to dream. But he kept his ambitions safely within the bounds of impossibility. A few years back, rumours circulated that he hoped to acquire Halifax Bank of Scotland, establishing Lloyds as a high-street mega-bank, commanding a third of the retail market. But Daniels knew the competition authorities would never allow it, so he could safely indulge in the pipe-dream.

So what were his feelings last September when his chairman, Sir Victor Blank, was buttonholed by Gordon Brown at a cocktail party and urged to rescue HBOS? "I rarely use superlatives but this is truly a wonderful combination," Daniels told the world. Some detected gritted teeth. But even if he was rail-roaded into the deal, says The Guardian, he had every chance to express his concerns. The HBOS deal was "as much his as Blank's". And last week he was well and truly "hboshed".

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The news that HBOS's 2008 losses, at £10bn, were twice as bad as thought caused a political furore. Opposition parties claimed Brown had ruined an otherwise solvent bank by foisting the 'poison pill' of HBOS on it. But Daniels doesn't look too clever either. As Lloyds' shares dived 30% on Friday, critics pondered the ethics of a banking chief who, 48 hours earlier, had somehow omitted to mention these losses when grilled by the Treasury Select Committee. The figures would have provided "explosive ammunition", says The Times, particularly when it emerged that Lloyds had conducted just a fraction of the usual due diligence on HBOS. In other words, Daniels allowed himself to be "suckered", says The Daily Telegraph: he didn't really know what he was buying.

Daniels now finds his reputation for cautious good sense in tatters. The Sunday Telegraph wonders if he has overtaken Sir Fred Goodwin as "Britain's most calamitous deal-maker". The Times explores the "sociopathic" tendencies of a man so out of tune with the public mood that he can describe his £1m pay-packet as "modest". Daniels may get the last laugh if Lloyds survives and he's still in the saddle when recovery kicks in. But that's a big if, says The Guardian. The prancing black horse is now a "knackered nag"; one more push could shunt it and Daniels through the trap door. On the wall of Daniel's office is a sign that reads "No Whingers". He may find it tough obeying it.

Peter Cummings: the Scot behind the worst of the losses

Eric Daniels has a reputation as a ruminative man "who thinks ferociously before he speaks", notes The Scotsman. But clearly not ferociously enough to discern the hit that HBOS's over-extended loan book would take from a further weakening in the economy. The mortgage business might be considered trouble enough. But the real "house of horrors", says Nils Pratley in The Guardian, is the corporate loan division formerly led by HBOS's banker-to-the-business-stars, Peter Cummings: "a bank within a bank" that was responsible for £7bn of the £10bn loss.

Cummings, a "short, squat and curmudgeonly Scot" who began his career at Bank of Scotland aged 16 making tea and sweeping the office floor, had a penchant for colourful entrepreneurs in retail and property, observes The Times. Star clients included Sir Tom Hunter, Sir Philip Green, Jn sgeir Jhannesson, Robert Tchenguiz and the Reuben brothers.

Cummings' door was always open to his friends: he was known "for doing business on no more than handshake" and, while the good times rolled, made billions for the bank. Most of the loans he offered were borrowed on the international money markets or from other banks. Cummings remained bullish, even as the roll-call of losing investments lengthened. "Some people look as though they are losing their nerve, beginning to panic even," he said last year. "Not us."

Cummings received a £660,000 pay-off and a generous pension when Lloyds took HBOS over, and is now "nowhere to be found". Some say he's holed up north of the border, or possibly in his luxury Spanish villa. One thing's for sure: he's unlikely to be on Eric Daniels' 2009 Christmas card list.