Parliament and the public were finally handed an official report yesterday (19 November) on what went wrong at Halifax Bank of Scotland and the way the then Financial Services Authority kept tabs on the lending giant.
This was the second worst failure in British banking history, after RBS, and with impairments in the loan book – as a proportion of the balance sheet – that were twice as bad.
The report published yesterday by the FSA’s successors, along with the report produced by the Parliamentary Commission on Banking Standards back in 2013, pretty much concluded the same things.
Ultimate responsibility for the demise of Hbos lies with the bank’s board, but the FSA was asleep at the wheel, and even the start of the financial crisis failed to wake them.
The FSA just did not appreciate the full extent of the risks facing Hbos. A small number of relatively junior staff were left to do the job at the time, which is a shocking reflection on their belief that small one-man band IFAs were potential con artists, while the big banks were admirable institutions.
One of the things that most annoyed me yesterday is it has taken £7m - the cost of producing the FCA/PRA report and Parliamentary Commission report - to come to a conclusion that industry commentators were stating literally within seconds of the government having to step in and open the nation’s purse to pull them back from the brink.
It has taken £7m to come to a conclusion that industry commentators were stating literally within seconds of the government having to step in.Has anything new and shocking been uncovered? No. The balance sheets and financial accounts were there for all to see.
The financial explanations from these reports are no different from the official ones issued by the lender in their numerous statements to shareholders and the chatter among the more cautious (and still afloat) in the mortgage lending industry during the boom years.
During the era when former prime minister Gordon Brown said boom and bust was a thing of the past, their growth-or-nothing strategy reaped them massive rewards.
As soon as Lehman Brothers collapsed and the funding market for mortgages dried up with the US sub-prime crisis, the bet that Hbos made saw their fortunes swiftly turn.
In terms of these expensive investigations, the cost can only be justified if it results in measures that mean taxpayers will never be forced to bail out a financial institution again.
The reality is for all the senior manager reporting regimes and talk of no more light touch regulation, credit unions continue to go bust daily and bump up the Financial Services Compensation Scheme levy.
And who pays that? You - or rather your client’s, who are taxpayers.
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