22nd July 2011
The news was announced in a letter from the Chairman of the FSA Adair Turner to the chairman of the Treasury select committee Andrew Tyrie. His letter is considered in some detail here on FTAlphaville.
The FSA is currently conducting an enforcement review into what happened at the bank which might lead to fines, but it has now promised the influential committee of MPs that it will also conduct a fuller broader review into what happened at the bank.
The review will not happen yet until the enforcement review is completed. A similar process took place for RBS where the FSA decided there were no grounds for action against Fred ‘the shred' Goodwin, a conclusion condemned by many as a whitewash. But it is now conducting an inquiry.
Both the RBS and HBoS inquiries will be vetted by external sources so that the FSA's role is examined properly.
The Conservative MP who heads the Treasury select committee Andrew Tyrie recently wrote to the FSA giving his reasons why the public need to know what happened.
"HBOS's role in the pre-crisis credit boom was a key element in the developments which led to the financial crisis and the macro economic harm which it has caused. There is therefore a public interest in knowing what happened at HBOS," he says.
HBoS was the huge banking group created by the merger of Bank of Scotland and Halifax after Halifax itself had converted from a building society to become a bank in the 1990s. Halifax was the largest of a spate of building society conversions to banks most of which failed to get through the crisis or have now been taken over.
HBoS incorporated other financial institutions too including former building society Birmingham Midshires.
For several years, HBoS was hailed for breaking into the ‘big four' banking circle in the UK joining Lloyds, HSBC, RBS NatWest and Barclays in a new big five and it was often praised for bringing more competition into the market.
At times, it held more than a third of the market for new mortgages in the UK and sold different types through several different brands. For example Birmingham Midshires sold buy-to-let and sub-prime mortgages, respectively mortgages to people who wanted to become landlords and those with a chequered borrowing record, Bank of Scotland sold business mortgages and large loans, while Halifax concentrated on the mainsteam market.
The FSA has ruled out publishing reviews into other failed institutions including Bradford & Bingley another buy to let specialist.
Many commentators have been surprised that the FSA has taken less action against senior bankers than might seem justified by the scale of the banking collapse. Here Independent money editor David Prosser writes: "Despite the public outrage over the perceived misdeeds of bankers in the run-up to the credit crisis, there have been remarkably few cases of regulatory action against individuals. A number of senior directors at Northern Rock have faced sanctions, while Johnny Cameron, the head of investment banking at RBS, has agreed not to take up a senior position in the City again. Other high-profile figures from the crisis, however, were not sanctioned and have now resumed their careers elsewhere."
Commentators have been suggesting for several years that HBoS holds the key to what went wrong as this view from the blogsite the Money Debate from 2009 shows.
On Citywire's report of the story Graham Barlow is upset on behalf of the Lloyd's shareholders who he feels were kept in the dark before the takeover.
"There are many questions to be answered on the takeover of HBOS by Lloyds. We all know how HBOS became unsustainable, Straying from classical Banking rules, No FSA supervision or forensic examination, coupled with delusions of Grandeur and Hubris. When are we to get the FULL unvarnished Facts over this monumental mistake by Lloyds who took over HBOS without any serious due diligence, and after endless warnings over the state of HBOS? Coupled to that is the hidden loans from the B of E which were never revealed to the shareholders. How long had they been in HBOS? It would have been a straight loss to the B of E had they been written off.. The shareholders are waiting impatiently for answers. That would be a report worth reading and of some real value, not re-writing history," he writes.
Commenter Paul Nedas, has an action group and wants to hear from at some disgruntled clients. He writes:
"Why did FSA appear to have ignored the warnings of Paul Moore — see his memo to the Treasury Select Committee. Interested to read what the the FSA will say about the conduct of Bank of Scotland Corporate and their involvement as lenders with Integrity Maximiser Plans. I am interested to hear from any HBOS clients who have suffered significant financial loss as a result of bank's actions or inactions. 020 7193 0831 Paul@FinancialAdviceLiability.com"
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