Regulation  

Regulators to investigate bosses at HBoS over the bank’s failure

Regulators to investigate bosses at HBoS over the bank’s failure

The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have decided to start investigations into certain former Halifax Bank of Scotland senior managers.

The regulators confirmed that the investigations will determine whether or not any prohibition proceedings should be commenced.

The FCA and PRA have stated that they will continue to review materials with a view to making further decisions regarding other former HBoS senior managers.

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The move to restart investigations into HBoS senior managers comes after a report by Andrew Green QC that criticised the Financial Services Authority’s failure to take enforcement action following the failure of HBoS.

According to Andrew Green QC, the FSA should also have investigated former HBoS chief executive Andy Hornby from early 2009.

The decision in March 2010 not to investigate Mr Hornby over his role in the demise of HBoS was deemed unreasonable by the QC.

Mr Green published his report alongside a PRA and FCA document on the failure of HBoS.

The FCA/PRA report also concluded that the FSA placed too much trust in the competence and capabilities of HBoS senior management and control functions.

The failure of HBoS was the second worst 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 by the FSA’s successors, along with the report produced by the Parliamentary Commission on Banking Standards in 2013, had the same findings.

The collapse of HBoS was found to be the result of catastrophic failures of management, governance and regulatory oversight.

Ultimate responsibility for the demise of HBoS lies with the bank’s board, but the FSA was found to be asleep at the wheel, and even the start of the financial crisis failed to wake them.

It cost £7m to produce the FCA/PRA report and Parliamentary Commission report.

Andrew Tyrie, chairman of the Treasury Committee, said it has taken “a heap of pressure” from Parliament to finally secure appropriate action from the regulators.

Tony Catt, compliance officer at East Sussex-based Anthony Catt Limited, said: “It is rather late to be going after these people after all this time. There is a move to make senior management more accountable, and I think that this is healthy.

“Previously, individuals could get away with mistakes and misjudgements because they were not accountable.

“Greater accountability should lead to better behaviour in the future.”

emma.hughes@ft.com