SBS Analysis: HBOS Collapse

On the eve of the publication of the 500 page investigation into the regulatory failure at HBOS, Dr Atul K. Shah set out the findings from his research into this multi-billion pound Bank Failure. He and his fellow researchers demonstrate that:

  • The outstanding Tyrie parliamentary investigation covered a lot of the major causes of this collapse and lessons to be learnt.
  • In this new report, we are once again asking regulators to investigate regulators, and have forgotten that the FCA is in the same building as the former FSA and has many of the same people working; Is this another planned whitewash?
  • The agenda is heavily skewed away from the politics of the scandal – e.g. the close friendship between HBOS CEO James Crosby and Chancellor Gordon Brown; and the political connections of Lord Stevenson, who was Chair of the Honours Committee in the Cabinet Office; What role did these play in influencing the regulatory failure?
  • The Auditors KPMG once again have been left totally out of the investigation. They were the principal professional third party inspecting HBOS throughout its short life, and failed to warn about its huge mismanagement and unmitigated risk taking. Our own research shows how this transpired.;
  • Exactly why did the FSA stop challenging HBOS after 2004, even when it was vociferous before? Is this connected to CEO Sir James Crosby joining one of its Boards? This will not be covered as the investigation only covers the period from January 2005.
  • Paul Moore’s whistleblowing story is now legend and has been written up in detail and investigated by our research. He challenged the executive at a timely moment in HBOS history and was fired in the full awareness of the FSA and a Sales manager with no risk experience was installed as Group Head of Risk? How was that allowed? Why did the FSA rely on the KPMG report on Paul Moore’s sacking, when they were fully aware of the conflicts of interest?
  • What role did the current Chairman of the FCA, Sir John Griffith-Jones, formally Chairman of KPMG, play in the shaping of the agenda of this report, which excluded his own previous firm from investigation? Why was he appointed to this hugely important role in spite of his conflicts of interest and non-challenging leadership of KPMG?
  • The Financial Reporting Council, responsible for policing audit firms and audit quality, have not investigated a single Big 3 audit firm involved in the mass audit failure of financial institutions prior to the Crash. In their press release, they were waiting for this FCA investigation report, helping to kick everything into the really long long grass. How captured are they by the Big Audit firms they regulate?
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HBOS whistleblower Paul Moore’s account has now been extensively investigated by SBS

These are the questions we will be seeking answers for in the new report. We doubt they will be answered, as they hit at the heart of the State protection of the City, through bailouts and coverups. We eagerly wait to be surprised by the findings.

 

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