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Green recommends that the PRA and FCA should now consider whether any former senior managers of HBOS should be the subject of an enforcement investigation with a view to prohibition proceedings.
No financial penalty can be imposed as the statutory time limit for starting disciplinary proceedings against individuals has expired.
At the time when the FSA first started considering enforcement action in relation to the failure of HBOS in December 2008, the FSA was required to issue a Warning Notice within two years of it becoming aware of the alleged misconduct (this changed to three years in June 2010).
Discussing the failure of the FSA's investigation, Green notes that "the obvious person" whose conduct should have been investigated was the former Group CEO, Mr Hornby. He says that an investigation into Mr Hornby from early 2009 would have enabled the FSA to investigate the range of problems within the failed bank.
Andrew Green said:
"Indeed, if the FSA ought to have investigated beyond Mr Cummings and Mr Hornby, a reasonable conclusion would have been that the more obvious additional targets were the CEOs of the Treasury and International Divisions at the date of failure, given the substantial losses/impairments generated by those divisions. The FSA, therefore, could reasonably have concluded, on the basis of its knowledge in early 2009, that there were at least four targets for enforcement action ahead of Lord Stevenson i.e. Mr Cummings, Mr Hornby, Mr Matthew (former CEO of the International Division) and Mr Mackay (former CEO of the Treasury Division).
Further deficiencies in the FSA's decision-making process, he said, include a complete absence of any records of any decision-making process and no clearly identifiable decision maker.
The 2013 PCBS report on the failure of HBOS concluded that “it is right and proper that primary responsibility for the downfall of HBOS should rest with Sir James Crosby, architect of the strategy that set the course for disaster, with Andy Hornby, who proved unable or unwilling to change course, and Lord Stevenson, who presided over the bank’s board from its birth to its death... The Commission therefore considers that the FSA should examine, as part of its forthcoming review of the failure of HBOS, whether these three individuals should be prohibited from holding a position at any regulated entity in the financial sector.”
Green said that in his view, the FCA and/or the PRA should, indeed, now consider afresh whether any former members of HBOS’s senior management should be subject to an investigation with a view to prohibition proceedings.
