The Prudential Regulation Authority (“PRA”) and Financial Conduct Authority’s (“FCA”) (together, the “Authorities”) joint investigations into certain former senior managers at HBOS plc (“HBOS”) have now concluded with a decision by each of the Authorities’ independent decision-makers to take no further action. The investigations, which began in 2016, were in response to Andrew Green QC’s November 2015 report into the reasonableness of the scope of the FSA’s enforcement investigations in relation to the failure of HBOS (the “Green Report”).
Authorities’ Investigations into certain former HBOS senior managers
The Authorities’ joint investigations considered the performance of certain former senior managers at HBOS in the years before its failure. The investigations considered whether or not those individuals should be subject to a prohibition order which would prohibit them from performing certain roles within the financial services industry.
The Authorities conducted rigorous and forensic investigations. Evidence was gathered in order to assess whether or not each individual may lack fitness and propriety to hold certain senior roles within the financial services industry in the future. In the course of these investigations, the Authorities gathered more than 2 million documents, interviewed former HBOS senior managers, engaged extensively with the parties, and undertook substantial analysis of contemporaneous documentary evidence considering those senior managers’ roles and responsibilities at HBOS prior to its failure in 2008.
No enforcement action
In line with standard practice, the Authorities’ independent decision-makers reviewed the matters under investigation and have each determined that no enforcement action should be taken against these former HBOS senior managers. These investigations have therefore been closed.
In 2009, the Financial Services Authority (“FSA”), the sole UK financial regulator of HBOS at the time, commenced enforcement investigations in connection with the 2008 failure of HBOS. Those investigations resulted in the FSA taking enforcement action in 2012 against the Bank of Scotland Plcfootnote  and the Chief Executive Officer of HBOS’ Corporate Division.footnote 
In November 2015, the Authorities jointly published ‘The Failure of HBOS plc (HBOS)’ report, which focused on HBOS’ failure by reference to its strategic and operational management and performance, and how it was supervised by the FSA.
Also in November 2015, the Green Report was published. The Green Report recommended that the Authorities consider afresh whether or not to undertake investigations into any other former HBOS senior managers. In 2016, the Authorities conducted further analysis and, following application of the Authorities’ respective investigation referral criteria, each regulator decided to open joint investigations into certain former HBOS senior managers.
Notes to editors
- On 1 April 2013: the FSA was replaced by two sister regulators, the FCA and the PRA. Both the FCA and the PRA have an enforcement remit and are able to exercise a range of enforcement powers and impose sanctions under the Financial Services and Markets Act 2000 (FSMA).
- A joint investigation refers to an investigation where both the FCA and PRA are investigating a particular matter. In such cases, the PRA and FCA will co-operate in their investigations to attempt to ensure that the subject is not prejudiced or unduly inconvenienced by the fact that there are two investigating authorities.
- 28 January 2016: Authorities’ statement on commencement of investigations into certain former HBOS senior managers: FCA and PRA investigations into HBOS Senior Managers (PRA) and FCA and PRA investigations into HBOS Senior Managers (FCA)
- A number of reports in relation to the failure of HBOS have been published:
- 7 March 2013: the Parliamentary Commission on Banking Standards (PCBS) considered the HBOS’ failure, publishing a report titled ‘An accident waiting to happen’.
- 19 November 2015, the FCA and PRA published a report into HBOS’ failure and the FSA’s actions titled ‘The failure of HBOS plc (HBOS)’, and
- 19 November 2015: Andrew Green QC’s report titled ‘Report into the FSA’s enforcement actions following the failure of HBOS’.
- 25 July 2016: the Treasury Select Committee published ‘Review of the reports into the failure of HBOS’.
- The investigations opened in 2016 were regulatory investigations pursuant to section 168 of FSMA. As set out in the Green Report, due to time limits imposed by FSMA, the Authorities were only able to open investigations to determine whether or not any prohibition proceedings should be commenced against any individuals. The Authorities were therefore unable to consider opening investigations to determine whether or not disciplinary proceedings for misconduct and the imposition of any fines should be commenced against any individuals.
- The independent decision-makers referred to in this statement are the PRA’s Enforcement Decision-Making Committee (EDMC) and the FCA’s Regulatory Decisions Committee (RDC)
- The FSA published a Final Notice in respect of the Bank of Scotland plc in March 2012, and
Mr Cummings in September 2012. You can read the Final Notices here:
- Since the failure of HBOS, fundamental changes have been made to the regulatory regime. In particular, the introduction of the Senior Managers and Certification Regime in 2016 has embedded greater individual accountability by ensuring authorised firms allocate clear responsibilities to key decision-makers.
- The following documents are also relevant:
- PRA investigation referral criteria - April 2019 (bankofengland.co.uk)
- PRA Regulatory investigations guide (bankofengland.co.uk)
- The PRA’s Approach to Enforcement (bankofengland.co.uk)
- Evaluation of the Senior Managers and Certification Regime (bankofengland.co.uk)
- FCA Enforcement Information Guide (April 2017) (fca.org.uk)
- The FCA's approach to Enforcement (fca.org.uk)
- FCA - Senior Managers and Certification Regime Banking Stocktake Report (August 2018) (fca.org.uk)