U.K. Watchdogs Start Investigations Into Former HBOS Senior Managers

  • Decision comes after report criticising regulator last year
  • Only one executive faced enforcement action over HBOS

U.K. regulators opened an investigation into former HBOS Plc senior managers months after they were widely criticized for failing to take action after the bank nearly collapsed amid the financial crisis.

The U.K. Financial Conduct Authority and the Prudential Regulation Authority "will determine whether or not any prohibition proceedings should be commenced" against former executives, the regulators said in a statement Thursday. Only one former manager faced enforcement action after HBOS nearly collapsed in 2008.

The decision was prompted by an official report from London trial lawyer Andrew Green published in November, one of two reviews of the HBOS collapse. Green said the enforcement decisions taken by the former regulator-- the Financial Services Authority-- after HBOS failed were “materially flawed” and the agency should have conducted a wider probe of those responsible.

The FSA targeted Peter Cummings, who ran the corporate-banking unit and was HBOS’s highest-paid banker, in 2012, but took no action against any other individuals. Cummings was fined 500,000 pounds ($716,000) and banned from working in the industry.

The FCA and PRA would be unlikely to issue any more fines against any of the former executives because the statute of limitations has expired, unless new information not previously known was found. There is no time bar on banning people from working in financial services. Green’s report highlighted as many as 10 individuals that could have some direct culpability for the bank’s failure.

The near-collapse of HBOS was one of the most controversial episodes of Britain’s financial crisis which led to a state-brokered takeover from Lloyds Banking Group Plc in 2009 and a 20.5 billion-pound taxpayer bailout.

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