British financial regulators will look into barring up to 10 executives linked to the 2008 collapse of the country's biggest mortgage lender, HBOS, some of whom still hold senior business roles.
The Bank of England (BoE) and the Financial Conduct Authority (FCA) published two long-delayed reports into HBOS on Thursday, which blamed HBOS's management for its failure and criticised the previous regulator, the Financial Services Authority (FSA).
The BoE and the FCA should consider whether to take action against HBOS's chief executive at the time of the collapse, Andy Hornby, who has since become chief operating officer at gambling company Gala Coral, the lawyer behind one of the reports said.
"The (BoE's) Prudential Regulation Authority and the FCA will conclude a review as to whether further enforcement action should be taken as early as possible next year," the central bank said in response.
Andrew Tyrie, the head of the British parliament committee which conducted an earlier probe into HBOS, said regulators should decide on bans "within months, not years", and that the role of HBOS's auditors KPMG needed more investigation.
KPMG declined to comment, while the FRC had no further comment.
HBOS - which traded under the brands Halifax and Bank of Scotland - had to be rescued in late 2008 via a government-engineered takeover by rival Lloyds, which subsequently needed a 20 billion pound ($30 billion) bailout of its own.
The bailout of Lloyds and its rival, Royal Bank of Scotland, caused Britain's public debt to balloon, prompted lasting public outrage at bankers, and triggered a revamp of British financial regulation.
The regulators' report reached similar conclusions to one by lawmakers in 2013, and BoE Deputy Governor Andrew Bailey said it highlighted the need for regulators to resist political pressure for light-touch bank regulation.
"HBOS was at root a simple bank that nonetheless managed to create a big problem," Bailey said.
Reckless lending in Britain, Ireland and Australia, particularly in commercial real estate, as well as reliance on insecure sources of financial market funding were behind HBOS's collapse. HBOS was not involved in "racy" investment banking activities, and its mortgage lending suffered smaller losses.
Bans Next Year?
Others who might be considered for action by the BoE and the FCA include former HBOS chairman Dennis Stevenson - a member of Britain's upper house of parliament - and the former chief executive of HBOS's treasury division, Lindsay Mackay, who is now chief executive of Alpha Bank London Limited.
Regulators cannot impose criminal penalties but could formally bar former HBOS staff from ever working in Britain's financial services industry.
In total, seven former HBOS executives or board members still hold senior finance roles.
To date, only the head of HBOS's corporate lending division, Peter Cummings, has ever faced a formal sanction as a result of the bank's collapse, though Hornby did give up a knighthood.
After the bailouts of Lloyds and RBS, the FSA was scrapped, its powers were given to the BoE and the newly created FCA, and reckless management of a bank became a criminal offence.
The government has now almost completed selling its stake in Lloyds back to the private sector, and the BoE is now in the midst of implementing tougher regulations approved by lawmakers in the aftermath of the financial crisis.
Some banks have appealed to politicians that the BoE risks being too interventionist, but the regulators said the case of HBOS showed the danger of weak and "too trusting" oversight.
"Regulators must be willing and able to (intervene) free from undue influence, in particular when financial market conditions appear to be benign, and in the face of changing public policy priorities," Bailey added.
Seven years on from the HBOS collapse, Britain's finance minister, George Osborne, has called for a "new settlement" with banks and wants regulators to make the City of London the most attractive location for international lenders in the world.
The report does not examine Lloyds's takeover of HBOS, or the role played by then prime minister Gordon Brown who helped to engineer the merger.
Thursday's report was due before the end of 2014, but delayed by the legal requirement for those criticised in it to be given a right to reply.
Cummings - who called the original judgement against him "unfair and ... a bit sinister" - required that parts of certain regulatory documents referring to him be blacked out.
(Reuters)
