HBOS inquiry suffers further set back

The FCA’s long-running inquiry into the collapse of HBOS has suffered a further setback with a conflict of interest row involving one of its independent reviewers.

Sky News reports that lawyers acting for individuals who face criticism in the report have argued that former Yorkshire Building Society chief executive Iain Cornish should not continue in his role as independent reviewer.

Cornish served on the Prudential Regulation Authority board between February 2013 and March of this year.

Lawyers have raised concerns in a recent letter that this creates a conflict of interest as the actions of the FSA – the PRA’s predecessor body – are likely to be criticised in the report.

People close to the regulator and the Treasury select committee say Cornish has continued to attend steering group meetings relating to the HBOS report since the lawyers’ complaint.

One source said Cornish had recused himself from HBOS-related discussions during PRA board meetings, meaning there was no conflict of interest.

Among the individuals expected to face criticism in the report are James Crosby, the bank’s chief executive during a rapid period of expansion, and Andy Hornby, who ran the company immediately preceding its bail-out.

The board oversight of Lord Stevenson, HBOS’ former chairman, is also likely to be scrutinised.

A process known as Maxwellisation, which allows individuals criticised in official reports to challenge regulators’ comments, was recently completed, but their consent is still required before the inquiry is completed.

The final report could be published in the autumn, according to Sky News.

The review got under way in 2012 but its publication has been repeatedly delayed.

In July 2014, the FCA said the report was due to be published by the end of the year.

HBOS had to be rescued by a £20bn capital injection from taxpayers into Lloyds Banking Group, which merged with the mortgage lending giant in 2009.

The PRA declined to comment.