HBOS report: Bank of England vows 'rapid action' - as it happened

Discussion in 'Market News' started by Lily, Nov 20, 2015.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    The long-awaited report into the collapse of HBOS has blamed senior managers, regulators, and the ‘light-touch’ regime

    5.09pm GMT

    Today’s “highly critical report” suggests regulators are likely to hold senior former HBOS managers to account, says Charles Kuhn, Partner at law firm Hickman & Rose.

    It brings them a step closer to prohibition proceedings against the top tier of HBOS management for the bank’s liquidity failure.

    Up till now we have witnessed a prolonged exercise in targeting lower-level personnel in an attempt to appease an angry post-crisis public and gain some much-needed credibility. There have recently been rumblings from Whitehall that the ‘reverse burden of proof’ may be reinstated into the soon-to-be in force Senior Managers’ Regime.

    Despite this positive outcome we will continue to question the merits of trying to solve the problems of a deeply complex and flawed system by making it easier to prosecute former banking management.”

    3.47pm GMT

    A spokeswoman from Skipton Building Society, where former HBOS finance director Mike Ellis is now chairman, said:

    Skipton appointed Mike Ellis as Chairman in May 2011 due to his significant and valuable experience of building societies, banks and regulation, and the personal qualities that have enabled him to lead the Board and work closely with the Executive team.

    Since his appointment Mike has provided outstanding leadership to the Board and overseen a significant improvement in the Society’s performance during the intervening four years. He has the wholehearted confidence of the Board for the contribution he has made and continues to make to the Society.

    Skipton Building Society says chairman Mike Ellis (ex-HBOS) has "wholehearted confidence of the board"

    3.16pm GMT

    A quick reminder of the key points from today’s report:

    The Bank of England had vowed to respond quickly to a new report into the collapse of HBOS.

    “The directors’ regime is entirely within their body of operation, not ours.”

    Related: HBOS collapse: report recommends formal investigation into executives

    2.57pm GMT

    Eight former directors of HBOS are disputing today’s report into the bank’s failure.

    They’re represented by Ashurst, an international law firm, which says there is no reason to take further action against anyone.

    The former non-executives directors of HBOS for whom Ashurst acts disagree with a number of the conclusions of this report, particularly the way in which it downplays the unforeseen and unforeseeable effect of the financial crisis on HBOS. Indeed the report acknowledges that its judgements have been reached with the benefit of hindsight. The report does not contain evidence that would justify any further enforcement action against executives.

    Equally, they understand the justified anger about what happened. The former Chairman and CEO resigned, apologised, waived contractual entitlements and lost their investments in HBOS. Their only wish now is that current and future bank boards learn to avoid the mistakes that they and others undoubtedly made.

    Related: HBOS collapse: where are the main players now?

    2.34pm GMT

    The Department for Business, Innovation and Skills says it has already decided not to ban HBOS executives, two years ago.

    But it might take a second look at the situation, if today’s reports have thrown up new evidence.

    “In 2013 the Insolvency Service looked at whether the disqualification of the directors of HBOS was in the public interest and concluded there was not sufficient evidence to commence proceedings at that time.

    “Once the FCA and PRA have conducted their review into enforcement action, we will establish whether there is any new information to consider.”

    Business dept (BIS) says insolvency service looked at former HBOS directors in 2013 and concluded "not sufficient evidence" for proceedings

    HBOS report has been sent to Dept of Business which has power to investigate directors

    2.19pm GMT

    Gala Coral, where Andy Hornby now works as chief operating officer, has issued a brief statement.

    It defends Hornby, while also avoiding commenting on the HBOS collapse:

    Andy Hornby has been a key member of Gala Coral Group’s management team for nearly five years, most recently as COO. During this time he has played a central role in the transformation of the business and has earned the continuing support of our colleagues, management and shareholders.

    Gala Coral Group is not in a position to comment on events relating to another organisation and sector some eight years ago.”

    Gala Coral says Andy Hornby key member of management team for nearly five years and has no comment on events at HBOS eight years ago

    2.15pm GMT

    The Chancellor of the Exchequer, George Osborne, hasn’t wasted any time blaming the former Labour government for contributing to HBOS’s failure

    “This report, from one of our most respected regulators, clearly shows that the collapse of HBOS was caused by those running the bank and those regulating it. It demonstrates that the system of regulation created by the last Labour government failed. In the end, this led to a £20 billion bailout of Lloyds Banking Group, funded by the taxpayer.

    “I don’t want the British taxpayer to be on the hook for any more bailouts. So since 2010 we have made big changes. We have dismantled the failed tri-partite system, and put the Bank of England back at the heart of financial supervision.

    “We have ensured that banks hold more capital and liquid assets, and that depositors are protected by a regulatory ring fence. And we have made bankers accountable for their actions, with those that bring down banks now facing up to seven years in prison. I welcome the fact that the report notes that this Government’s steps have addressed many of the failings that led to the collapse of HBOS. Next spring we will complete the sale of Lloyds Banking Group, putting the bank back into the private sector - its rightful place.”

    2.10pm GMT

    The Institute of Directors has urged regulators to pull their fingers out, and decide whether to open new investigations into former HBOS bosses.

    Oliver Parry, senior corporate governance Adviser at the IoD, says:

    “There is justifiable anger that, so far, only one HBOS executive has been reprimanded for his involvement in its failure. The regulators have plans for further investigations and it is in everyone’s interest for these to be completed much quicker than the seven years we have waited for this one.

    1.45pm GMT

    That’s the end of the press conference.....

    1.41pm GMT

    Can @bankofengland tell panel to turn their mobiles off as the signal is interfering with the webcast!

    1.40pm GMT

    Nils Pratley gets the (crackly) microphone again:

    Q: Given the blunders which regulators made over HBOS, can we have any confidence in the FSA’s report into Royal Bank of Scotland?

    1.35pm GMT

    Q: Could Andy Hornby and other senior HBOS officials now be disqualified as company directors?

    Bailey (joking that he’s showing his age) says he remembers the collapse of Barings Bank in 1995, in which disqualification rules were exercised.

    1.32pm GMT

    Q: Was the FSA under pressure from the Labour government to not ask for more tools, or to take more action against banks before the crisis?

    There was a belief that this was a very good thing...don’t kill the goose that laid the golden egg.

    1.25pm GMT

    Isn’t it staggering that it took so long to allow those criticised in the report to respond, asks our financial editor Nils Pratley. Is Maxwellisation* working as it should do?

    It’s a good question, responds Charles Randell (a lawyer who serves on the Prudential Regulation Authority). But Maxwellisation wasn’t the only reason that the report took so long.

    1.19pm GMT

    This press conference wouldn’t pass a “fit and proper” test -- a problem with the microphones means Andrew Bailey is struggling to hear the questions.

    1.18pm GMT

    Q: What action could be taken against the people who were running the FSA when HBOS failed?

    Bailey says those people were not in “approved roles” at the time - and they’ve now all left the regulator.

    1.15pm GMT

    Andrew Bailey also confirms that HBOS executives cannot now be fined, because today’s reports took so long to be released.

    1.14pm GMT

    Q: How long will it take to decide whether to open enforcement procedures against former HBOS managers?

    Andrew Bailey says action will be taken ASAP.

    1.12pm GMT

    Andrew Bailey, deputy governor of the Bank of England, tells the press conference that “rapid action” will be taken following today’s reports.

    The HBOS case is an example of the perils of inadequate regulation, he adds.

    1.10pm GMT

    The Bank of England is holding a press conference to discuss the report - it is being streamed live here.

    1.02pm GMT

    Our financial editor, Nils Pratley, explains how some HBOS executives could be feeling worried today:

    None of the big three at HBOS – former chairman Lord Stevenson and former chief executives James Crosby and Andy Hornby – would wish to work for a bank again, and no lender would want to hire them.

    Stevenson concentrates on his charity gigs and Waterstones bookshops these days. Crosby gave up his gong and avoids the limelight. Hornby continued his executive career at Boots and now Coral, well away from the City.

    Those former HBOS managers named in the report will have reason to sweat today – but so will former senior FSA officials, most of whom can now be found in senior private sector posts.

    My quick take on HBOS report: a damning indictment of failed bankers and regulators

    12.57pm GMT

    The report highlights how HBOS’s aggressive mortgage lending accelerated ahead of its deposit base in the run-up to the crisis, leaving it unable to survive the credit crunch.

    12.38pm GMT

    Andrew Tyrie MP, who chairs parliaments’ Treasury Committee, has called for regulators to decide quickly whether any HBOS bosses should be sanctioned.

    “The Parliamentary Commission on Banking Standards asked the regulators to consider whether any former members of HBOS’s senior management should be subject to investigation proceedings with a view to prohibition. At the request of Parliament’s specialist advisers, the job of responding was passed to Andrew Green QC. We now have his clear answer. They should be.

    “Better late than never. What’s more, Mr Green concludes that the FSA should have got on with this in 2009. And he has come to this view, not with the advantage of hindsight, but by basing his conclusions on the material available to the FSA at that time.

    "Better late than never" says MP Andrew Tyrie of the HBOS verdict

    12.32pm GMT

    A pithy summary, from Newsnight’s Duncan Weldon:

    HBOS report in a tweet: bad business model & management failure, FSA failed to stop but operating in a political context of "light touch".

    12.32pm GMT

    The regulatory structure put in place by the last Labour government contributed to the crisis, says the report.

    It is now clear that the FSA’s pre-crisis approach to prudential supervision was not appropriate for the purpose of meeting its market confidence objective.

    However, the FSA was responsible for a broad range of financial regulation issues and was expected to regulate within established global standards.

    12.30pm GMT

    The report lays out the key reasons why HBOS’s risky lending and flawed strategy meant it was survive the financial crisis:

    12.26pm GMT

    The report doesn’t spare the regulators’ blushes either.

    It says that the Financial Services Authority had identified the key risks which HBOS faced -- but had then failed to take appropriate steps to mitigate these risks effectively.

    Supervisors need to employ their judgement and take appropriate actions in response where necessary.

    A particular challenge is to intervene sufficiently early when a firm is apparently successful but supervisors can identify weaknesses that are sufficiently important to pose a threat to the firm that is inconsistent with the objectives of supervision. HBOS was such a firm

    12.23pm GMT

    The report has no time for the suggestion that HBOS was simply unlucky -- sunk by a once-in-a-lifetime financial crisis.

    Its top managers should have been better prepared, it says:

    The management of a firm is not required to have perfect foresight. The criticism in the Report is not that management failed to predict that there would be a global financial crisis. Rather, they should have put in place strategies that could in combination accommodate and respond to, in a timely way, changes in external circumstances.

    12.21pm GMT

    The paradox of the HBOS story is that the bank was generally seen as a success, until close to its collapse, says the BoE’s Andrew Bailey:

    The 2001 merger of Halifax and Bank of Scotland had yielded double-digit profit growth in all but one of the years up to end-2006 and analysts’ and brokers’ views were positive at least until early 2007.

    But, by this time, the seeds of the firm’s destruction had already been sown as a flawed strategy led to a business model that was excessively vulnerable to an economic downturn and a dislocation in wholesale funding markets.

    12.19pm GMT

    The 400-page report is online here:

    12.16pm GMT

    Andrew Bailey, deputy governor of the Bank of England, says HBOS simply didn’t understand what it was getting into.

    “The story of the failure of HBOS is important both to provide a record of an event which required a major contribution by the public purse, and because it is a story of the failure of a bank that did not undertake complicated activity or so-called racy investment banking.

    HBOS was at root a simple bank that nonetheless managed to create a big problem.”

    12.13pm GMT

    Here’s Jill’s early news story, which she’ll be adding to through the afternoon:

    Related: HBOS collapse: report recommends formal investigation into former executives

    12.12pm GMT

    The former regulator, the Financial Services Authority, has also been criticised.

    The report founds that:

    Flaws in the FSA’s supervisory approach meant it did not appreciate the full extent of the risks HBOS was running and was not in a position to intervene before it was too late.

    12.10pm GMT

    The HBOS review has also concluded that “ultimate responsibility for the failure of HBOS rests with the Board and senior management”.

    It says that:

    they failed to set an appropriate strategy for the firm’s business and failed to challenge a flawed business model which placed inappropriate reliance on continuous growth without due regard to risks involved.

    12.08pm GMT

    Our City editor Jill Treanor has spent the morning digesting the report.

    She is tweeting that those bankers running HBOS before the crash could now be investigated, and potentially banned from the City.

    City regulators told it is the public interest to conduct through investigation into former senior executives of HBOS

    Lord Stevenson, former HBOS chair , bears “responsibility individually and collectively and as board member for the failings of the board”

    FSA concluded in 2010 Andy Hornby, former HBOS CEO, could have been investigated but decided against launching formal investigation

    Former FSA official Clive Adamson told the HBOS investigation: “the people most culpable were let off”

    12.03pm GMT

    The reports are out!

    And they are recommending that regulators should consider bringing fresh charges against those responsible for the failure of HBOS.

    As part of the Review, Andrew Green QC was asked to provide an independent assessment of whether the decisions taken on enforcement by the former regulator, the FSA, were reasonable.

    The PRA and FCA are therefore also today publishing Andrew Green QC’s report into the FSA’s enforcement actions following the failure of HBOS.

    11.50am GMT

    Here’s a fateful photo from September 2008, showing HBOS CEO Andy Hornby alongside Lloyds chairman Sir Victor Blank.

    11.42am GMT

    You can get up to speed on the HBOS affair, and relive the financial crisis, with this timeline:

    Related: HBOS timeline: the countdown to collapse

    11.41am GMT

    We’re actually getting two reports today.

    As well as the main inquiry into the collapse of HBOS, a top lawyer has examined why only one executive - director Peter Cummings - was ever sanctioned over the crisis.

    11.29am GMT

    The collapse of HBOS was one of the most dramatic events in the wild autumn of 2008, when the failure of Lehman Brothers triggered global panic.

    Like Royal Bank of Scotland (which was also bailed out), HBOS epitomised the boom that grew in the UK financial sector at the start of the decade.

    11.10am GMT

    The official investigation into the collapse of HBOS in 2008 is about to be released.

    At noon precisely, Britain’s Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) will issue their report on the bank’s 2008 collapse.

    10.58am GMT

    Back in Greece, Syriza MP Gabriel Sakellaridis has quit rather than support the government in tonight’s austerity vote (as explained in earlier post).

    This is a blow to Alexis Tsipras’s government, as it struggles to implement its unpopular third bailout.

    #SYRIZA MP #Sakellaridis gives up seat in parliament after Tsipras' request, says 'cannot contribute to the implementation of govt policy'

    Insiders are now speaking of a “mini government crisis.”

    Gavriel Sakellarides’ resignation is all the more poignant for the fact that he was the former government spokesman and a very close ally of Tsipras.

    storm in a wine cup: at least one #ANEL MP the ever bizarre Nikos Nikolopoulos refusing to endorse multi-bill in 2night's vote

    #Greek government's majority is likely to be reduced w expected desertions after tonight's vote on latest EU-mandated measures

    10.29am GMT

    European stock markets have hit levels last seen before China’s Black Monday crash in August.

    This morning’s rally has pushed the Stoxx 600 index of leading European shares up by 1.1%, to a three month high.

    “We have had an interesting FOMC minutes and risk assets have rallied across the board with the dollar weaker and EM [emerging market assets] leading the way.”

    “That is the success of the Fed really. We expect they will hike in December but then proceed slowly after that and that has soothed markets.”

    9.42am GMT

    WorldFirst’s Jeremy Cook is first to react to the weak UK retail sales report:

    “Retail sales in October are always a strange one – unable to benefit from the ‘back to school’ rush and unlikely to see too many Christmas shoppers and hence can see a slight slip in expenditure.

    This year is no different given September’s number was boosted by strong spending around the Rugby World Cup and warm weather and we have seen a natural pause on the nation’s High Streets before the manic festive season begins.”

    9.40am GMT

    Just in - UK retail sales declined month-on-month in October, even though shops continue to cut prices.

    The Office for National Statistics reports that retail sales volumes shrank by 0.6% compared with September, while the amount spend fell by 0.7%.


    9.29am GMT

    A very chatty Praet repeats that the #ECB is ready to act, members are having "rich discussions" and rate cuts are part of the toolbox.

    9.28am GMT

    The European Central Bank’s chief economist is dropping a strong hint that monetary policy will indeed be eased next month.

    Peter Praet is telling an audience in Frankfurt that downside risks are prevailing in the eurozone, with price pressures subdued and investment still depressed.

    Peter Praet sees "confirmation" of downside risks in global economy. Easing in December a done deal, in case there was any doubt left.

    ECB's Peter Praet says lower bound for interest rates "may be lower than we thought months or years ago"

    9.17am GMT

    We’re just seeing reports that a Greek government MP has been ordered to resign, after saying he wouldn’t support the austerity measures being voted on tonight.

    If Gavriil Sakellaridis steps down, he could be replaced by a new Syriza candidate.

    #Greek PM @atsipras asks lawmaker @gabriel_athens to quit #Greece

    #Tsipras asks SYRIZA MP Gavriil Sakellaridis to resign following reports that he plans to abstain from tonight's parl't vote via @geoterzis


    9.12am GMT

    Nothing is ever easy in Greece, when bailout funds are involved.

    And over in Athens, the government is racing to tweak its latest austerity plan after some MPs protested against raising the tax on (gulp) wine.

    According to sources, the new proposal is likely to propose a smaller tax on wine (of 0.15 euros rather than the 0.30 euros originally mooted) along with another measure to cover the difference.

    8.56am GMT

    It feels like a December US interest rate hike is in the bag. Which means investors can move on to pondering other things, like the eurozone.

    The ECB could well ease monetary policy next month -- boosting its QE programme, and hitting banks with more negative interest rate to force them to lend.

    It is becoming clear that the most important Central bank meeting in December is not that of the Federal Reserve but instead the European Central Bank on December 3rd.

    Even then we are having difficulty pricing expectations; while traders are pricing in a 10bps cut in the deposit rate with 100% certainty and a 20bps cut to about a 50% certainty there is no real way of pricing in increases in quantitative easing.

    World First Morning Update September 19th - December is a given, after is a puzzle -

    8.39am GMT

    Mining stocks are helping to drive European markets higher this morning.

    Markets are clearly liking the US central bank’s faith in US economic recovery and belief in a gentle ‘testing of the water’ first move towards policy normalisation, whilst peers are doing the exact opposite, will not derail economic recovery or deliver market mayhem.

    Just that little bit more certainty goes a long way.

    8.27am GMT

    Good news for anyone who took part in Royal Mail’s flotation in 2013 -- shares are up 4.5% this morning.

    Demand for parcels and mail in the UK and Europe, pricing and cost pressures, upcoming union negotiations on wages and productivity, higher cash pension costs and regulatory risk with an on-going review of the UK mail market by the regulator Ofcom.

    8.15am GMT

    Poundland has been relegated to the bargain bin this morning, after the discount retailer’s latest results failed to impress.

    8.10am GMT

    #Germany's Dax jumps above 11k as markets reacted w/ calm to Oct FOMC minutes which pointed to a liftoff in Dec.

    8.09am GMT

    A solid start to trading in Europe has seen the FTSE 100 rise by 0.5%, or 32 points, to 6311.

    The German DAX is up almost 1%, with France’s CAC gaining 0.7%.

    Markets received further confidence following the highly anticipated FOMC minutes release that the Federal Reserve will finally begin to raise US interest rates in December.

    The comment that “it may well become appropriate” to raise US interest rates in December installed confidence among investors, especially considering that this meeting took place before the exceedingly impressive employment report released at the beginning of this month.

    7.55am GMT

    Asian stock markets have jumped overnight, as expectations grow that the US central bank is ready to raise interest rates.

    Shares rallied in Tokyo, Shanghai, Hong Kong and Sydney after the minutes of last month’s Federal Reserve meeting showed that most policymaker believe the US economy could handle higher borrowing costs from December.

    Related: Interest rate hikes likely in December, Federal Reserve minutes reveal

    “If - when - they lift rates in December, the Fed will likely be very aggressive in highlighting the idea of a very gradual pace.”

    7.39am GMT

    Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

    Former HBOS executives will learn whether they face fresh investigations into their conduct in the run up to the bank’s near collapse in 2008.

    Thursday’s publication of the much-delayed and long-anticipated report into what went wrong at the bank will be published alongside an opinion commissioned by the regulators into the decision in 2012 to only punish one former executive.

    Related: HBOS's former bosses wait to learn their fate

    FOMC minutes signalled that a notable number of Fed officials believe that the US economy is now ready for interest rates to be lifted

    Continue reading...

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