HBOS collapse report author slams own probe as too narrow

Renewed pressure has been turned up on the Bank of England and other regulators to take action against senior HBOS executives after the author of one report into the near collapse of the bank said his investigation had been too narrow.

Lawyer Andrew Green, who wrote a report published last month and commissioned by the now-defunct Financial Services Authority, said it was materially flawed, too narrow in scope and should have scrutinised former chief executive Andy Hornby.

The Scotland-born former head of HBOS’ corporate lending division, Peter Cummings, is the only person to have faced any formal sanction as a result of the bank’s collapse in 2008 which required rescue through a government-engineered takeover by Lloyds - which itself subsequently needed a £20 billion taxpayer bailout of its own.

Green’s report prompted the Bank of England to say it would consider barring up to 10 executives, including Mr Hornby, linked to the debacle.

Calling for further action, Mr Green said: “In the circumstances where you have the chief executive of a systemically important bank that fails — and is failing across multiple areas — it seems it is pretty obvious and in the public interest that he should have been investigated in early 2009.”

Mr Hornby was HBOS chief executive at the time of the collapse and has since become chief operating officer of gambling company Gala Coral.

Mr Green said: “From the moment this went wrong, and the moment when enforcement action was being considered, because of the richness of information on Peter Cummings he was the only person who was really considered.”

He said the introduction of Britain’s Senior Managers’ Regime, which will hold executives more accountable from next March, should make it easier for regulators to allocate potential blame when things go wrong.

Mr Green said: “It will still be necessary to establish personal culpability. I think establishing personal culpability will always be a very big ask when you are dealing with senior bankers.”

He also criticised the regulator for refusing to allow the names of four FSA officials, who took part in a 2009 meeting that decided only to pursue Mr Cummings, to be published.

Committee chairman Andrew Tyrie said MPs would consider whether to use its authority to obtain the names, though this would not be a witch hunt.

Mr Tyrie said Britain’s accounting standards watchdog had also made a serious mistake in refusing to open a formal investigation into accountancy firm KPMG over the way it checked the books of HBOS.

He has asked the Financial Reporting Council, which polices accounting firms, to reconsider the need for an investigation into the auditing by KPMG of HBOS.

The FRC said it had received Mr Tyrie’s letter and noted its contents.

The accounting watchdog said last month it found no reasonable grounds to suspect misconduct in its own review of HBOS audits in the run-up to the collapse.

It also said it would review the regulators’ final report, published last month, to see if there was any new information.

KPMG has said that a FCA document in 2012 noted that the accounting firm had suggested to HBOS management it should take a more conservative approach to provisioning.

KPMG had no further comment.