HBOS probe may lead to bans for bosses

The bosses of bailed-out bank HBOS may be banned from working in the City of London after it emerged that they allegedly put pressure on auditing firm KPMG to fudge accounts.

An official investigation by the Bank of England's Prudential Regulation Authority and Financial Conduct Authority will on Tuesday report that the lenders' directors leant on the accountants to sign off lower bad loan provisions in a bid to reduce concerns about its financial health, according to a report from Sky News.

KMPG had apparently calculated a more pessimistic view about the bank's balance sheet but HBOS management allegedly intervened to adjust the level of provisioning required.

In 2012 the head of the bank’s commercial lending division, Peter Cummings, was banned for life from the banking industry and fined £500,000 in 2012.

But former chairman, Lord Stevenson, and chief executives James Crosby and Andy Hornby, cannot now be fined as regulators took too long to warn them of any enforcement action before a six-year statute of limitations ran out last year.

However, a City ban for the 'HBOS Three', who were accused by a parliamentary commission on banking standards of “colossal” management failures, is still thought possible, according to other reports.

The PRA and FCA report reportedly will explain that the alleged pressure from HBOS directors on KPMG was applied prior to HBOS announced a £4bn rights issue that first confirmed to investors the bank's dire capital position.

Sky reported that lawyers acting for the former HBOS bosses are understood to have vigorously argued that the conclusions of the team compiling the new report are not supported by minutes of board meetings at the time.

Critics of Lloyds' takeover of HBOS deal have also expressed hope the report might provide clear evidence that Lloyds was sold a 'pup' when it rescued the failed lender in September 2008.