Here are the five keys findings from the 407-page report:
1) Better blame those bankers
Remember when Hbos accounted for 20 per cent of the mortgage market?
The report found the group put itself under pressure and as margins declined on all forms of lending, a search for yield pushed it towards more risky propositions.
Each of the lending divisions experienced an increase in its risk profile to grow income levels, with the report stating a ‘key feature’ of the balance sheet was its concentration in property, particularly the commercial variety.
The board failed to identify the extent to which Hbos was moving up the risk curve as a result of ambitious growth plans, so by 10 September 2008, the balance sheet was no longer in a state to handle the run on the banks that followed.
Hbos faced what is described as an “unexpected funding need” of £12.5bn in the week after Lehman Brothers failed. By 18 September Lloyds TSB had taken over Hbos.
The report concluded that the board and senior executive management failed to set an appropriate strategy and also failed to challenge a flawed business model that placed inappropriate reliance on continuous growth, without due regard to the risks involved.
2) ‘Light touch’ approach of FSA at fault
Remember a time when then chancellor Gordon Brown used to say boom and bust was a thing of the past? Well the report found the Financial Services Authority fell for that hook, line and sinker.
The FSA was found to be regulating on the basis that financial stability, meaning regulation of financial firms should be ‘light touch’ and too trusting of firms’ management.
The report showed that oversight by the FSA board, led by chairman Sir Callum McCarthy, was insufficient.
However the FSA’s successors and producers of this report said a major contributor to this failure was international standards of prudential regulations for banks, which were inadequate in the case of capital adequacy and absent in the area of liquidity regulation.
3) Loose lips cost bank lives: role of the media
On 19 March 2008, a British bank was rumoured in the markets to be facing severe strain, including difficulties securing funding amid ‘pessimistic chatter’ following the collapse of Bear Stearns - after which UK bank shares fell between 2 per cent and 13 per cent, with Hbos being the worst performer.