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FCA orders new inquiry into HBOS chiefs FCA orders new inquiry into HBOS chiefs
(about 1 hour later)
City regulators have decided to investigate the role of HBOS’s senior management in the near collapse of the bank during the financial crisis more than seven years ago.City regulators have decided to investigate the role of HBOS’s senior management in the near collapse of the bank during the financial crisis more than seven years ago.
The Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority will investigate the bank’s bosses, who could be barred from working in the City.The Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority will investigate the bank’s bosses, who could be barred from working in the City.
The FCA said the investigations would decide whether the former bosses, who include ex-chief executive Andy Hornby and his chairman, Lord Stevenson, should face prohibition proceedings. The FCA said the investigations would decide whether the former bosses, who include ex-chief executive Andy Hornby and his chairman, Lord Stevenson, should face prohibition proceedings. The FCA declined to identify which former managers it would investigate.
The decison follows a highly critical report by Andrew Green QC regarding regulatory enforcement decisions taken over HBOS, which traded as Halifax and Bank of Scotland. The bank was rescued by Lloyds in a Labour government-engineered deal in September 2008. Those under investigation have been informed and the FCA has appointed investigators with the power to call subjects in for questioning as they re-examine evidence. The FCA will undertake the bulk of the work because its job is to investigate misconduct in the City although the PRA will contribute on matters which threatened the financial system.
This is a breaking news story, please check back for further updates Potential penalties against the bank bosses do not include fines due to the three-year time limit. That limit has since been extended to six years. The investigation is likely to take many months.
The decison follows a highly critical report in November by Andrew Green QC into decisions made by the FCA’s predecessor, the Financial Services Authority, over HBOS. The bank, which traded as Halifax and Bank of Scotland, was rescued by Lloyds in a Labour government-engineered deal in September 2008.
Green criticised the FSA’s decision to ban and fine HBOS’s former head of corporate banking, Peter Cummings, from working in the City but leave others free to carry on their business careers.
He said the regulators should consider immediately whether to investigate other former managers of HBOS including Hornby and Stevenson. But he said the FSA was reasonable in deciding not to investigate James Crosby, who quit as chief executive in 2006 and has since handed back a knighthood over the HBOS affair.
Hornby revived his career, first as chief executive of Alliance Boots and, since 2011, at the bookmaker Gala Coral, where he is chief operating officer. Gala Coral, which is privately owned, is planning to merge with Ladbrokes in a deal that would put Hornby back near the top of a public company though not on the board.
Other former HBOS leaders who could face investigation include ex-finance chief Mike Ellis, who is chairman of Skipton building society, Colin Matthew, who ran HBOS’s international division, and Lindsay Mackay, who ran the treasury operation.
HBOS was Britain’s biggest mortgage lender but it was almost brought down by reckless commercial property lending. Green’s review of the FSA’s decisions on HBOS accompanied a wider report into the bank’s failure that described an inexperienced board and a management team that ignored risks in a quest for growth.
The bank’s lending spree caused bad debts of £45bn – more than the £38bn in losses racked up by the far larger Royal Bank of Scotland. After Lloyds bought HBOS the combined bank was bailed out with £20bn of taxpayers’ money as Gordon Brown’s government tried to prevent the financial system from collapsing.
George Osborne announced on Thursday that he was postponing the sale of the final 10% of Lloyds shares owned by taxpayers due to volatile financial markets.
The FCA said: “The Financial Conduct Authority and the Prudential Regulation Authority have decided to start investigations into certain former HBOS senior managers.
“These investigations will determine whether or not any prohibition 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.”