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Banking commission slams FSA failings in HBOS collapse

Andrew Tyrie BBA Conference 2012 480

The parliamentary commission on banking standards has attacked the FSA for its “thoroughly inadequate” supervision of HBOS.

In its report, An accident waiting to happen: The failure of HBOS, published last week, the panel said the FSA ignored warnings and failed to follow up on concerns.

PCBS chair Andrew Tyrie says: “The regulators also have a lot of explaining to do when it comes to their role earlier in the HBOS debacle. From 2004 up until the latter part of 2007, the FSA was ‘not so much the dog that didn’t bark as the dog barking up the wrong tree’.”

The report states that HBOS is symbolic of a “fundamental weakness” in the regulatory approach before the crisis and a number of opportunities were missed to stop HBOS’ failure.

It states: “The regulatory approach encouraged a focus on box-ticking which detracted from consideration of the fundamental issues with the potential to bring the bank down.

“The FSA’s approach also encouraged the board of HBOS to believe that they could treat the regulator as a source of interference to be pushed back, rather than an independent source of guidance and, latterly, a necessary constraint upon the company’s mistaken courses of action.”

Banking consultant Mehrdad Yousefi says: “Those responsible at the FSA should be banned because they were asleep on the job. The FSA’s repeated failure of supervision nearly brought down the UK banking system.”

An FCA spokesman says it will consider the findings and published its own report at a later date, expected this summer.

 

MPs’ anger over the FSA’s failings

  • In January 2008 the Treasury select committee said the FSA had failed to spot systemic risk at Northern Rock before a run on the bank in autumn 2007.
  • In October 2012 the TSC slammed the FSA for not intervening in Royal Bank of Scotland’s takeover of ABN Amro in 2007.
  • In the same month TSC member attacked the FSA for making a “pig’s ear” of the RDR at the Conservative party conference in Birmingham.
  • In February the FSA agreed to undertake a “lessons learned” review of payment protection insurance misselling as total compensation tops £10bn.
  • In March an internal FSA review said it should have been more “inquiring and challenging” over Libor rigging.
  • In April the parliamentary commission on banking standards slammed the regulator for “thoroughly inadequate” supervision of HBOS.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. …and what about the FSA’s limp wristed approach to Mortgage Lenders who deliberately concealed the true meaning of the Standard Variable Rates written into their Mortgage Contracts several years ago before the crisis in 2007.
    When, is the FSA, in its new incarnation, going to do something about this “miss- selling” issue or is this a hot potato too far for our beloved Financial Services Industry? I for one have been swindled out of £60000 in the past 4, years alone and there are probably tens of thousands more just like me.

  2. And all the senior people at the FSA have, it seems, got away apparently scot free. Some have done even better than that ~ Sants got his knighthood and Briault got a golden parachute worth £612,000.

    But you never know ~ Andrew Tyrie seems to be a determined man and at least some measure of justice may yet be meted out.

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