The investigation is understood to be looking at the role of executives and board directors as well as reviewing the banks’ internal controls.
FSA supervisory officials will examine whether the banks’ boards and shareholders were given enough infor mation as well as the performance of directors before rights issues undertaken by HBoS and RBS earlier last year.
The FSA is reckoned to have called for tenders from major accountancy firms to aid the inquiry, which is expected to start in the next few weeks.
The FSA refused to comment on the investigation.
Bill Warren Compliance managing director Bill Warren says: “There was a lot of in-depth risk analysis that should have been undertaken that was not and hopefully this will drive it out.
“The FSA has to look at how good the banks were at analysing real risks as opposed to traditional risks. I suspect some of the assumptions made concerning risk were made on traditional concepts, not modern-day risks.”