October 30, 2012 12:49 am

Inquiry into collapse of HBOS to begin

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Parliament’s commission on banking standards has opened an inquiry into the 2008 collapse of HBOS and plans for the first time to use legal counsel to cross examine witnesses at a public hearing on Tuesday.

The move by the committee, which was appointed amid the public furore sparked by Barclays’ admission that its traders sought to manipulate Libor, is the most aggressive move yet by Parliament to hold bankers and regulators responsible for the bank failures during the financial crisis.

The City watchdog has already promised its own account of what went wrong at HBOS, much likethe report it issued on Royal Bank of Scotland last year. But the commission has decided to move ahead on its own, in part because it believes the Financial Services Authority will not finish its report before the commission is expected to make recommendations to Parliament.

“This should help us to get to the bottom of what went wrong and why. By doing so we will be better placed to make recommendations for remedy,” said Andrew Tyrie, commission chairman.

Lord Turnbull, former cabinet secretary and a commission member, will lead the inquiry panel and David Quest will serve as its counsel. They will hear testimony from three former HBOS executives, Paul Moore, who was fired from his risk management job in 2004 after warning that HBOS was taking excessive risks, Colin Matthew, former chief executive of the international businesses and Jo Dawson who held a variety of roles in risk and retail.

“We already have a comprehensive overview of what went wrong at RBS. I have no doubt there are many other lessons to be learnt from the collapse of HBOS,” Lord Turnbull said. “We want to find out not just what went wrong and how it was allowed to happen but also what warnings were or were not given and what warnings were ignored.”

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