Well done on forex – what about HBOS?
NO doubt the corks are popping i n Canary Wharf at the headquarters of the Financial Conduct Authority. The FCA has won some rare plaudits for its relatively swift and hard action over the rigging of the £3.5trillion-a-day foreign exchange market. It doled out a record collective fine of £1.1bn on five banks, after an investigation taking just 13 months, which is very speedy work indeed by the standards of the City watchdogs.
Leaving aside the small matter of Barclays, which declined to join in the settlement, it is a good result for the embattled regulator. But any self-congratulatory pats on the back at the FCA are premature so long as the report into the collapse of HBOS remains unpublished.
It now appears that the interminably- delayed report may face a further hold-up, and may not be ready for release by the end of this year as hoped.
If that is so, then unless it is published pretty quickly in the new year, it is likely to be kicked into the long grass until after the election because of the political sensitivities involved. This is utterly ridiculous. It is now six years since HBOS went to the wall and in terms of the direct impact on ordinary members of the public, the downfall of the former building society is much more significant than forex or Libor rigging.
Not only were millions of savers and borrowers involved, but also hundreds of thousands of small shareholders, who saw the value of their investments plunge. Taxpayers were forced to back a £20bn bailout by Lloyds Banking Group, but have yet to see a forensic examination by the regulator.
While we endure the long, long wait for the report, those at the top – former chief executives James Crosby and Andy Hornby, along with erstwhile chairman Lord Stevenson – have not been held accountable. Indeed, Hornby continues to pursue a corporate career as boss of Gala Coral.
The only individual to have been punished is former top corporate banker Peter Cummings, who has been banned for life from the financial services industry and fined £500,000.
Why has there been such an unconscionable delay on a matter of clear public interest? The explanation for the latest hold-up seems to be ‘Maxwellisation’, a process named after the late and unlamented newspaper tycoon Robert Maxwell, who established the right for people criticised in official inquiries to see the sections applying to them before a report is published.
THIS procedure may prevent damaging f actual errors about individuals from gaining currency. It also offers a field day for former bosses and their highly-paid lawyers to launch endless challenges, in the hope of derailing or at least delaying critical findings.
Maxwellisation is not the FCA’s fault. The regulator has to work within the system. The inquiry has also stretched out over a period when City regulation has been overhauled.
But there have been damaging own goals by the regulators.
The seeming reluctance on the part of the FSA to go after the top men has created delay and complication: a wider inquiry into the debacle was not launched until September 2012, after enforcement proceedings against Cummings had been tied up. There is also a review by Andrew Green QC into whether the regulator should look again at the possibility of banning other former senior managers. That adds another layer that could have been avoided if the FSA had taken a proper look at the conduct of top executives in the first place.
As the Parliamentary Commission on Banking Standards pointed out when it published its report into HBOS last year, the downfall of the former building society involved a colossal failure of senior management and the board.
The continued delays of the HBOS report also place the FCA chairman John Griffith- Jones in an ever-more invidious position.
Griffith- Jones was chairman of accountancy firm KPMG, which audited HBOS from 2001 to 2009. It rang no alarms as the bank hurtled towards ruin, and earned £15.7m audit fees in 2008, the year of disaster.
He is not personally involved in the HBOS inquiry, but there is clear scope for the perception of conflict of interest.
Separately, the FCA has shot itself in the foot with a media briefing in March in which it disclosed an investigation into 30m policies held by ‘zombie’ pension and insurance funds, wiping billions of pounds off share prices in the insurance sector.
The report into that debacle, which led to calls for the resignation of FCA boss Martin Wheatley, is due to be published shortly.
Apart from forex, Wheatley has scored some recent successes. But the FCA cannot claim to hold its head high until it has delivered the truth, however painful, on HBOS.