Accounting watchdog ‘slow’ on HBOS probe

The accountancy watchdog admits it should have been faster in probing why KPMG approved stricken HBOS’S accounts just seven months before the bank was rescued by Lloyds in the financial crash.

The Financial Reporting Council (FRC) said in September it was closing its inquiry into the audit, saying KPMG’S work for HBOS “did not fall significantly short of the standards reasonably to be expected”. But yesterday the FRC chief executive Stephen Haddrill said in a letter to Nicky Morgan, chair of the House of Commons Treasury select committee: “A learning point for the FRC is that we should have adopted a more proactive approach to our early enquiry in relation to HBOS rather than a heavy reliance on other regulators.”

The FRC added that at the time the audit was done there was “good evidence” that the possibility of HBOS failing was “remote”.