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FCA orders new inquiry into HBOS chiefs FCA orders new inquiry into HBOS chiefs
(about 9 hours 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 are 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 (PRA) will look into the bank’s former 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 declined to identify which former managers it would investigate. The FCA said the investigations would decide whether the senior figures, who include the former chief executive Andy Hornby and former chairman Lord Stevenson, should face proceedings that could strike them off the FCA’s approved persons list. The FCA declined to identify which past managers it would investigate.
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. Related: HBOS timeline: the countdown to collapse
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. Those under investigation have been informed, although the names have not been made public, and the FCA has appointed investigators with the power to call subjects in for questioning as it re-examines evidence.
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. Potential penalties against the bank bosses do not include fines, due to a three-year time limit. That limit has since been extended to six years. The investigation is likely to take many months and could face multiple legal hurdles if individuals choose to challenge potential attempts to ban them.
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. 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 on the high street as Halifax and Bank of Scotland, was rescued by Lloyds in a Labour government-engineered deal in September 2008.
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. 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. 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. Green said the regulators should consider immediately whether to investigate other former managers of HBOS, including Hornby and Stevenson, and that the regulator was wrong not to have considered investigations into other former bosses.
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. Regulators have also faced intense political pressure to look again at HBOS. The Financial Reporting Council said last week that it would re-examine KPMG’s auditing of the bank after criticism from the Treasury select committee, which also called on the FCA to hold individuals to account.
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. Andrew Tyrie, the committee chairman, said: “Overdue doesn’t capture it. It is eight years since the collapse of HBOS. It has taken a heap of pressure from parliament to secure appropriate action from the regulators.
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. “Mr Green concluded that the FSA should have got on with this in 2009. So the FCA and PRA should conduct these investigations immediately.”
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. 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. The FCA cannot bar someone from being a company director outside the finance industry, but the Department for Business can do.
The FCA said: “The Financial Conduct Authority and the Prudential Regulation Authority have decided to start investigations into certain former HBOS senior managers. Other former HBOS leaders who could face investigation include the former finance chief Mike Ellis, the chairman of Skipton building society, Colin Matthew, who ran HBOS’s international division, and Lindsay Mackay, who ran the treasury operation.
“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.” Gala Coral said Hornby had played an important role in improving the bookmaker’s business and that he had the confidence of colleagues, management and the company’s owners. Skipton said neither Ellis nor the building society had been contacted by the FCA about its decision.
Stevenson could not be reached through the House of Lords. In November, he and other former HBOS directors issued a statement saying that an investigation into their conduct was not warranted.
HBOS, Britain’s biggest mortgage lender, was almost brought down by reckless corporate lending and attempts to run its treasury operation for maximum profit. 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 which 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 9% of Lloyds shares owned by taxpayers due to volatile financial markets.