Friday 23 August 2019

HBOS expanded in Ireland without due risk assessment, UK regulators find

Bank of Scotland logo. Photo: PA
Bank of Scotland logo. Photo: PA

Donal O’Donovan

The pace and scale of Bank of Scotland Ireland (BOSI)’s expansion in Ireland during the boom was a “blueprint for rapid uncontrolled growth with inadequate risk mitigation.”

A damning report into the failure of British lender HBOS has highlighted the damage caused by the bank’s property led expansion in Ireland as well as in Australia in the run up to the global financial crash.

UK financial regulators are to look into potentially barring up to 10 executives linked to the 2008 collapse of what had been Britain’s biggest mortgage lender, following publication of two reports today.

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

They both blamed HBOS's management for its failure and criticized the previous regulator, the Financial Services Authority (FSA).

Reckless lending in Britain, Ireland and Australia, particularly in commercial real estate, as well as reliance on insecure sources of financial market funding were behind HBOS's collapse. HBOS was not involved in "racy" investment banking activities, and its mortgage lending suffered smaller losses.

Andrew Tyrie, the head of the British parliament committee which conducted an earlier probe into HBOS, said regulators should decide on bans "within months, not years", and that the role of HBOS's auditors KPMG needed more investigation.

KPMG declined to comment, while the FRC had no further comment.

HBOS - which traded under the brands Halifax and Bank of Scotland - had to be rescued in late 2008 via a government-engineered takeover by rival Lloyds, which subsequently needed a 20 billion pound ($30 billion) bailout of its own.

(Additional reporting Reuters)

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