MP's Fury Over Delay To HBOS Crisis Report

By Mark Kleinman, City Editor

A member of the influential Treasury Select Committee criticised City regulators on Friday amid signs of a further delay to the completion of an inquiry into the near-collapse of HBOS in 2008.

Speaking to Sky News, Mark Garnier MP said the further delay, which is likely to mean publication of the report will not take place until at least the summer of this year, undermined the principle of the inquiry.

The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) said last July that they aimed to publish their final report by the end of 2014, more than two years after work on it got underway.

Sky News revealed in December that the watchdogs would fail to hit that deadline because of the lengthy process which allows those criticised in official reports to lodge objections.

The regulators' report was initiated after concerted pressure from the Treasury Committee, which will be determined to scrutinise the findings and recommendations of the final document.

However, one parliamentary source said on Friday that there was now "little or zero chance" of the report being finalised before March 30, when the select committee system will be dissolved ahead of May's General Election.

Select committees can take up to three months to be re-formed after an election, meaning that a reconstituted Treasury committee may not be operating before mid-August.

"The whole point of these inquiries is to learn the lessons of the past," Mr Garnier said.

"If the regulators take so long that it is nine months behind its own deadline, you end up not learning those lessons in a timely fashion."

It is now more than six years since HBOS had to be rescued by a £20bn capital injection from taxpayers into Lloyds Banking Group, which took over the mortgage lending giant.

To date, only one former HBOS executive, Peter Cummings, has faced regulatory censure.

In 2012, he was fined £500,000 and banned for life from working again in financial services after being accused of failing to "exercise due skill, care and diligence".

The HBOS report's preparation has already been snared by repeated controversy, initially when the then Financial Services Authority said it had no intention of publishing such a review.

A process known as Maxwellisation, which allows people criticised in official reports to challenge regulators' comments, was launched last summer but is proving painstakingly slow, according to insiders.

Officials said last summer that because the report would rely on confidential information "previously provided by HBOS and other relevant parties, their consent will also be legally required before publication of this information."

Among the individuals expected to face criticism in the report are James Crosby, the bank's chief executive during a rapid period of expansion, and Andy Hornby, who ran the company immediately preceding its bail-out.

A separate review handled by Andrew Green, a leading QC, will examine whether regulators has reached an appropriate judgement in relation to enforcement actions against individuals.

It will "offer an opinion...as to whether the regulators should consider afresh whether any other former members of HBOS's senior management should be subject to an investigation with a view to prohibition proceedings," regulators said during the summer.

Andrew Tyrie, the Conservative MP who chairs the Treasury Select Committee, declined to comment on the latest delay.

He is expected to stand for a further term as the Committee's chairman if he is re-elected as an MP in May.

The PRA declined to comment.

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