Sunday 11 December 2016

UK report blasts Bank of Scotland (Ireland) on boom-era expansion

Published 20/11/2015 | 02:30

The Bank of England (BoE) and the Financial Conduct Authority (FCA) published two long-delayed reports into HBOS yesterday (Stock image)
The Bank of England (BoE) and the Financial Conduct Authority (FCA) published two long-delayed reports into HBOS yesterday (Stock image)

Bank of Scotland Ireland's (BOSI) boom-era expansion in Ireland was a "blueprint for rapid uncontrolled growth with inadequate risk mitigation".

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A damning report into the wider failure of UK lender HBOS has detailed the bank's property-led expansion in Ireland and Australia in the run-up to the global financial crash.

UK financial regulators are considering action against up to 10 executives linked to the 2008 collapse of what had been Britain's biggest mortgage lender, following publication of two reports.

The Bank of England (BoE) and the Financial Conduct Authority (FCA) published two long-delayed reports into HBOS yesterday.

The reports blames management, and lack regulation, for a crisis that left the bank requiring a £20bn (€28.5bn) bailout.

A report by independent lawyer Andrew Green into whether the Financial Services Authority (FSA) was sufficiently rigorous in holding HBOS executives to account includes a call to review the regulator's decision not to act against 10 executives.

HBOS's expansion in Ireland as late as 2007 is singled out for criticism in a separate report by the Bank of England's Prudential Regulation Authority.

The report found the UK bank came into the Irish bubble late, and grew aggressively - from £8.9bn in 2004 to £21.9bn in 2007, according to regulators' estimates.

BOSI's unit here was opening branches at a rate of three per month in the 14 months from the beginning of 2006, after buying a chain of former electricity showrooms from the ESB in a move presented at the time as "innovative and cost effective".

"This seems to have been a high-risk strategy and it is questionable whether the risks were properly thought through," the report found. By rolling out lending before it could offer standard current accounts the bank lacked a potential early warning indicator of troubles with its customers, the report said.

As well as mortgage lending, HBOS piled into commercial property lending in the UK, Ireland and Australia.

By the end of the Review Period, £12bn of the bank's International Division's Irish portfolio and £6bn of its Australian portfolio was exposed to commercial property or related sectors.

In some cases that included massive lending to individual borrowers. (Additional reporting Reuters)

Irish Independent

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