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FCA sets out scope of HBOS inquiry

An FCA inquiry into the failure of HBOS will look at the reasons behind its collapse and the regulator’s handing of the crisis at the bank.

The review into HBOS got under way in 2012 under a draft terms of reference. But as the FCA begins to approach those set for criticism, the regulator has published the full terms of the inquiry.

The inquiry is intended to find out why the bank failed; look at its financial position, governance and culture; and make recommendations for the future. This part of the report will be reviewed by independent reviewers who have been agreed by the Treasury select committee.

The role of the regulator will also be considered in a separate part of the report that will be written by a team of independent contributors, led by Andrew Green QC.

TSC chair Andrew Tyrie says: “It is now Parliament’s job to ensure that this review is completed with enough independence to reassure the public that the regulators conducting it do not pull their punches on the failures of their predecessor institution, the FSA.”

In the wake of the collapse of Lehman Brothers in September 2008, HBOS’s share price fluctuated wildly amid speculation the bank had asked for emergency funding. 

In late 2008 the bank received a multi-billion pound bailout from the UK government. In 2009, HBOS merged with Lloyds, with the blessing of then chancellor Alistair Darling. As of March 2014, Lloyds was still 25 per cent owned by the state.

The report is expected to be published by the end of this year.

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