19th November 2015
A damning review into why high street bank HBOS collapsed has concluded that the ultimate responsibility for the failure rests with its board and senior management.
On Thursday the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) published their assessment of the failure of the bank during the crisis.
As part of the Review, Andrew Green QC was asked to provide an independent assessment of whether the decisions taken on enforcement by the former regulator, the FSA, were reasonable.
In his report, he recommended that the PRA and FCA should now consider whether any former senior managers of HBOS should be the subject of an enforcement investigation with a view to prohibition proceedings.
Reports show that the possibility of investigations and banning orders for up to 10 former executives has been mooted. These include former chairman Lord Stevenson, former chief executive Andy Hornby.
In October 2008 HBOS was swiftly approaching a point at which it was no longer able to meet its liabilities and sought Emergency Liquidity Assistance from the Bank of England.
The PRA’s and FCA’s report said that the bank’s senior management failed to set an appropriate strategy for the firm’s business and “failed to challenge a flawed business model which placed inappropriate reliance on continuous growth without due regard to risks involved”.
In addition, the supervisory approach from the previous regulator, the Financial Services Authority meant it did not appreciate the full extent of the risks HBOS was running and was not in a position to intervene before it was too late.
Andrew Bailey, deputy governor of the Bank of England, CEO of the Prudential Regulation Authority and accountable executive for the HBOS Review said: “The story of the failure of HBOS is important both to provide a record of an event which required a major contribution by the public purse, and because it is a story of the failure of a bank that did not undertake complicated activity or so-called racy investment banking.
“HBOS was at root a simple bank that nonetheless managed to create a big problem.”