HBOS report points to formal investigation

19 November 2015

_1312161_hbos300 The report about the complete mess at HBOS has indeed, shoved a load of blame at the feet of the bank's former board, calling for formal investigations. In short, the investigation has called for another investigation.

The huge report (400 thrilling pages) was published, looking at banning orders against former chairman Lord Stevenson, and former chief executives Andy Hornby and James Crosby. Other people who used to be at HBOS like Mike Ellis, current chairman of Skipton building society, Colin Matthew from the international division, and Lindsay Mackay who ran the treasury, have also been named.

"Ultimately responsibility for the failure of HBOS rests with its board," said the report. It also points a finger at the former heads of the now-defunct Financial Services Authority. The boardroom at HBOS has been described as lacking in banking nous, and creating a culture that wanted growth at all costs. The FSA meanwhile, have been described as making mistakes, and having an investigation that was too narrow, with particular emphasis on their decision to only investigate one former HBOS executive, Peter Cummings.

Cummings who was banned and fined £500,000 back in 2012, but the report says there were clear indications that others should've been looked at.

"It is my view appropriate that the FCA and/or the PRA should now take the opportunity to give proper consideration to the investigation of individuals other than Mr Cummings and thereby do that which their predecessor failed to do. There is plainly a public interest in the FCA and/or the PRA giving proper consideration as to whether to investigate any other former members of HBOS’s senior management in the light of the failure of this systemically important bank," said Andrew Green QC, who did the FSA review.

The report quotes Clive Adamson, who used to be the FSA director of enforcement, saying that "the people most culpable were let off."

Green continued: "It appears that because enforcement could not be certain of winning disciplinary proceedings against Mr Hornby, the decision was taken not to investigate him. This was a misguided approach in that placed excessive weight on a view of the prospects of success formed at such an early stage."

The report says: "The FSA’s approach was too trusting of firms’ management and insufficiently challenging. The FSA executives management, led by chief executive John Tiner, designed (and failed to redesign) this deficient approach to supervision. Further the oversight of the executive by the FSA board, led by the chairman Sir Callum McCarthy, was insufficient." It added that the regulators at the time were guilty of only employing a "light touch" when it came to controlling the City.

Regulators will now conduct their own review into whether enforcement action on the strength of this report, with decisions being made on that "as early as possible next year".

TOPICS:   Banking   Investments

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