The report into the £20bn collapse of HBOS in 2008 – commissioned by the Bank of England and published today - is already creating quite a stir. It makes pretty sorry reading and raises the possibility that as many as 10 former senior execs could face bans.
Those include ex-CEO James Crosby, his successor Andy Hornby and ex-chairman Lord Stevenson, who have all faced criticism in the past. But there has only been one real casualty as a result of the HBOS debacle so far - Peter Cummings, former head of corporate broking at the bank, was banned from the industry and fined £500,000.
It's hot stuff, not least because the HBOS disaster touched almost everyone who was anyone, from then-PM Gordon Brown to the bank’s bosses, city regulators at the now-defunct FSA (some of whom now work for its replacements the FCA and PRCA) and even HBOS’s auditors KPMG.
None of these leading dramatis personae emerge smelling even vaguely of roses. The report criticises the business model of HBOS and states that ultimate responsibility for the failure lies with the baord and senior management (no, really?), and criticises a lack of banking experience at the top (Hornby remember came from a retail background).
But it also takes the then-regulator the FCA to task for its 'deficient' approach, trusting what it was told by HBOS management and not doing enough to spot trouble coming and nip it in the bud.
For those whose memories need jogging, HBOS was the bank that collapsed so spectacularly back in 2008, taking Lloyds Banking Group down with it on the way and costing a cool £20.5bn. It became the poster child of the financial crisis, and not in a good way. It used the wholesale capital markets to pursue what one whistleblower - former HBOS head of regulatory risk Paul Moore - has alleged was a ‘growth at all costs, pile it high, sell it cheap’, strategy. At its peak, he told the BBC this morning, HBOS was having to borrow more than one and a half times the annual cost of the NHS every year simply to refinance its loans.
The report was originally set to see the light of day two years ago (even the un-shameable Southeastern Trains might blush at such a delay) but had to wait so that all those involved could have a chance to see it – the same ‘Mazwellisation’ process that has delayed the Chilcot report into the Iraq War even longer. Cynics might point out that it also means that the FCA’s five years statute of limitations is behind us. Handy.
So will further action be taken? The report says that the currewnt regulators should consider bans on the former HBOS execs, and that any decision should be taken by early ini the New Year.
Which leads us to the ticklish problem that many of those working for the new regulators - the FCA and PRCA - were also at the old FCA when HBOS went down. How embarrassing.
The problem here is age old – on the one hand a scandal like this touches so many big cheeses in government, finance and even the wider business community that there is a risk that the cure might wind up being worse than the disease.
On the other we have moral hazard – remember that? Organisations - and ultimately the people who run them – should be held accountable for their actions, or what’s to stop it all happening again.
How will the balance be struck here? It looks like we're going to have wait still longer to find out.