HBOS report recommends fresh charges for former directors

A Bank of England-backed probe into the failure of lender HBOS in 2008 has recommended that regulators consider bringing fresh charges against former senior managers.

The Bank asked lawyer Andrew Green to provide an independent assessment on the decisions taken on enforcement by the former regulator, the Financial Services Authority (FSA).

The Bank's new regulatory bodies, the Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA), on Thursday published Green's report into the FSA’s enforcement actions following the failure of HBOS.

"In his report, Andrew Green QC recommends 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."

PRA boss Andrew Bailey said the regulators accepted Green's recommendation and aim to conclude a "rapid" new review as to whether further enforcement action should be taken, which he suggested would be completed in a matter of months.

Speculation prior to the release of the report had suggested ex bosses of the bailed-out bank, which was rescued by Lloyds in 2008, could be banned from working in the sector.

Green's focus centered on former chairman, Lord Stevenson, and chief executive Andy Hornby, neither of whom still work in the sector, but he said the FSA's decision not to investigate Hornby's predecessor James Crosby was "reasonable because he left the firm before its collapse".

There were in all 10 individuals that the FSA should have considered investigating, Green said, including Mike Ellis, former HBOS finance director, and now chairman of Skipton Building Society; and Lindsay Mackay, former head of the Treasury division and still an FCA-approved person.

The reports from the PRA and FCA said the ultimate responsibility for the failure of HBOS rests with its board, who failed to instil an appropriate culture, which resulted in a "flawed and unbalanced strategy".

Criticism from Green was also reserved for the FSA. A "striking feature" of the bank's failure, he wrote, was how the former regulator "did not appreciate the full extent of the risks HBOS was running and did not take sufficient steps to intervene before it was too late", though he noted that resources at the FSA were very stretched.