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FSA sets out how it will investigate HBOS

HBOS plc 480

The FSA board has set out how it will carry out its report into the failure of HBOS and warned the cost of the review will exceed the inital estimate.

The FSA’s board minutes from its September meeting, published last week, reveal Grant Thornton will analyse the management and culture at HBOS in the run-up to the financial crisis which led to the bank being taken over by Lloyds Banking Group in September 2008.

The “big four” accountancy firms – Deloitte, Ernst & Young, PwC and KPMG – ruled themselves out of carrying out the analysis into HBOS due to potential conflicts of interest.

The FSA board says the HBOS report “needs to address any perceived influence” that former FSA deputy chair Sir James Crosby had on the regulator’s supervision of HBOS, given he had been HBOS chief executive during part of the period the report will focus on.

Crosby resigned from the FSA in February 2009.

The board says the cost of the review is higher than anticipated and it has asked Grant Thornton to review its pricing.

The minutes say: “The cost of the review was likely to be higher than initially anticipated. The estimated cost was not considered unreasonable in view of the scope of the work although the board encouraged the executive to check the reasonableness of the rates of the senior partners who would be involved.”

Lloyds is paying for the review to be carried out.

Evolve Financial Planning director Jason Witcombe says: “There is no point in going to the expense of carrying out a report unless the regulator learns from its mistakes.”

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