The Prudential Regulation Authority and Financial Conduct Authority conclude investigations into senior managers in relation to the 2008 failure of HBOS plc

News release

The Prudential Regulation Authority (“PRA”) and Financial Conduct Authority’s (“FCA”) (together, the “Authorities”) joint investigations into certain former senior managers at HBOS plc (“HBOS”) have now concluded with a decision by each of the Authorities’ independent decision-makers to take no further action. The investigations, which began in 2016, were in response to Andrew Green QC’s November 2015 report into the reasonableness of the scope of the FSA’s enforcement investigations in relation to the failure of HBOS (the “Green Report”).

Authorities’ Investigations into certain former HBOS senior managers

The Authorities’ joint investigations considered the performance of certain former senior managers at HBOS in the years before its failure. The investigations considered whether or not those individuals should be subject to a prohibition order which would prohibit them from performing certain roles within the financial services industry.

The Authorities conducted rigorous and forensic investigations. Evidence was gathered in order to assess whether or not each individual may lack fitness and propriety to hold certain senior roles within the financial services industry in the future. In the course of these investigations, the Authorities gathered more than 2 million documents, interviewed former HBOS senior managers, engaged extensively with the parties, and undertook substantial analysis of contemporaneous documentary evidence considering those senior managers’ roles and responsibilities at HBOS prior to its failure in 2008.

No enforcement action

In line with standard practice, the Authorities’ independent decision-makers reviewed the matters under investigation and have each determined that no enforcement action should be taken against these former HBOS senior managers. These investigations have therefore been closed.

Background

In 2009, the Financial Services Authority (“FSA”), the sole UK financial regulator of HBOS at the time, commenced enforcement investigations in connection with the 2008 failure of HBOS. Those investigations resulted in the FSA taking enforcement action in 2012 against the Bank of Scotland Plc^{footnote [1]} and the Chief Executive Officer of HBOS’ Corporate Division.^{footnote [2]}

In November 2015, the Authorities jointly published ‘The Failure of HBOS plc (HBOS)’ report, which focused on HBOS’ failure by reference to its strategic and operational management and performance, and how it was supervised by the FSA.

Also in November 2015, the Green Report was published. The Green Report recommended that the Authorities consider afresh whether or not to undertake investigations into any other former HBOS senior managers. In 2016, the Authorities conducted further analysis and, following application of the Authorities’ respective investigation referral criteria, each regulator decided to open joint investigations into certain former HBOS senior managers.