HBOS collapse: It has taken far too long for bankers blamed to be properly punished

Yesterday’s reports into the former City regulator’s failures around the collapse of HBOS are as damning as they are delayed. After years of Chilcot-scale deliberations and legal blockages, the investigation from Andrew Green, QC, eventually left few stones unturned. And under each barnacled pebble, he discovers a monster – be it the failure of the now-defunct Financial Services Authority to question the culpability of the bank’s chairman and chief executive, or one of the FSA’s own senior executives’ claims that “the people most culpable were let off”.

Mr Green paints a picture of a City watchdog so starved of funding that overworked regulators opted to investigate and blame only one man for the bank’s catastrophic collapse. Peter Cummings, whose division’s slapdash lending did indeed trigger massive losses for the bank, was personally named, shamed and fined £500,000, but nobody else paid a price.

While Mr Green’s call for a proper investigation into the actions of those around and above Mr Cummings is welcome, it is to be deplored that, thanks to the time it has taken to get this far, those found guilty can no longer be fined due to the statute of limitations. Seven years since the bank’s collapse, we are still nowhere near officially apportioning blame. Mr Green’s review merely triggers a new investigation – this time by the new regulator, the Financial Conduct Authority – and possibly a second, by another City watchdog, into the role played by HBOS’s auditor, KPMG.

This second regulator, the Financial Reporting Council, has previously concluded KPMG has no case to answer, and looks far from keen to launch another investigation. This newspaper hopes the Treasury Select Committee chairman Andrew Tyrie’s attempt to shame it into action succeeds. Too little has been made of the Financial Services Authority (FSA) calling in KPMG, HBOS’s own auditor, to investigate a senior whistleblower’s claims that the bank was lending recklessly – a conflict of interest.

A report into this aspect of the HBOS debacle may make difficult reading for the Financial Conduct Authority’s current chairman, John Griffith-Jones, who was in charge of KPMG in the UK and Europe at the time. Such overlaps are not uncommon; HBOS’s James Crosby was made a non-executive director of the FSA in 2004 while still running the bank.

The long time between those cataclysmic days at the height of the financial crisis and the publication of the report may dull the senses of a once-outraged public. It should not. The collapse of HBOS, caused by suicidal lending carried out by bankers keen to hit bonus targets, destabilised the country’s entire economy, causing misery for the thousands put out of work. It was a major factor leading to taxpayers being forced to bail out these badly run private companies. The results are still felt today.

For the millions whose pensions hold shares of both HBOS and Lloyds (which was corralled in to rescue its rival), HBOS’s management has cost them dearly. Finally, we must hope that the cash-starved and overworked conditions that blighted the old City regulator are no longer in play at the new generation of watchdogs. At a time when the Chancellor, George Osborne, has stated his intention to go easier on bankers, the public needs to be reassured bad behaviour will be stamped on.