Gladstone Brookes | Former HBOS executives under the microscope

Former HBOS executives under the microscope

VFormer HBOS execs under the miscroscope

Both of the UK’s financial regulators are to put former HBOS executives under intense scrutiny for their parts in the collapse of the bank at the start of the financial crisis.

The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) will both investigate the roles that top executives played in the failure of the bank.

Damning

Two damning reports into the HBOS affair at the end of last year severely criticised both the bank and the Financial Services Authority (FSA) over the events in 2008.  They had examined the reasons behind the bank’s collapse and the role played by the FSA in its failure to take action.

A joint Bank Of England/FCA report examined the mechanics of the bank’s failure while barrister Andrew Green QC criticised the FSA for its failure to take action against a number of key figures.

Furore

The release of the two reports created a furore when it emerged that it is unlikely anyone else would face a fine for their part in the affair because the collapse happened so long ago it is outside the six year statute of limitations.

The twin reports into the bank collapse – which cost £7 million and took three years to complete – were produced seven years after the event after being delayed for a year by legal wrangling over their content.

Joint investigation

Now the FCA and PRA will start a new joint investigation to re-examine the whole affair.

In a statement they said: “We have decided to start investigations into certain former HBOS senior managers.  These investigations will determine whether or not proceedings should be commenced against them.  The FCA and PRA continue to review materials with a view to making further decisions regarding other former HBOS senior managers.”

Detail

No detail has been given about exactly who will be investigated, the exact nature of the inquiry or how long it is expected to take.

So far the only person to be banned because of their involvement is Peter Cummings who was the head of corporate lending ag HBOS.  In 2012 he was fined £500,000 and banned from holding future senior positions in banking.

Misguided

But Andrew Green’s report suggested be taken against a total of 10 executives, including former chief executive Andy Hornby.  Mr Green said the FSA was ‘misguided’ in deciding not to take action against him.

Other names in the frame were another former chief executive James Crosby, former group finance director Mike Ellis and head of the Treasury division Lindsay Mackay.

Former FSA director of supervision Clive Adamson told Andrew Green that ‘the most culpable people were let off.’

Deficient

The FCA was highly critical of its predecessor, the Financial Services Authority, saying it was ‘deficient’ in the way it handled HBOS.

It said the FSA’s supervisory framework:

  • Had inadequate resources devoted to big banks
  • Was too trusting of senior management
  • Had a risk assessment process that was too reactive

PRA chief Andrew Bailey, recently appointed to the top job at the FCA, commented: “It’s quite clear primary responsibility lies with the board and senior management of HBOS.  It is right that Mr Green recommended ‘looking again at the question of the prohibition of people who haven’t been prohibited.’

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