A new banking watchdog is needed to win back the trust of customers and root out intolerable financial practices for good, a group of influential MPs has said.
Hundreds of jobs were lost in Calderdale and West Yorkshire when the Halifax Bank of Scotland (HBOS) bank collapsed in 2008 and after years of investigation and review, the House of Commons Treasury Select is recommending one final measure to help the UK banking sector fully recover.
Today the Treasury Select Committee is asking new Chancellor Philip Hammond to give the green-light to a new body that would oversee enforcement action against badly-run banks.
Chairman of the committee, the Right Hon. Andrew Tyrie MP has said all the evidence from the HBOS disaster shows that placing the Financial Conduct Authority’s enforcement arm into a new organisation would help the sector turn over a new leaf.
It is understood the bank regulator could become over-burdened with work as it is currently responsible for both supervising banks and issuing disciplinary action.
The proposal to separate the two functions has already been rejected by the Treasury once under George Osborne but the Treasury Select Committee’s review says all the evidence surrounding HBOS’ collapse indicates that customers are keen to for greater independence within the sector.
Commenting on the report, which assessed years of material relating to the failure of HBOS and banking regulators, Mr Tyrie said: “The regulators failed, both before and after the HBOS crisis. Seven years after the bank’s collapse, we now know just how badly.
“It took persistent pressure from the Treasury Committee to ensure these failures weren’t swept under the carpet.”
Following the financial crash of 2008 the Financial Services Authority was severely criticised and was eventually scrapped in 2013 and replaced with the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), which is part of the Bank of England.
Mr Tyrie said: “So the HBOS experience calls for the FCA and the PRA to exhibit greater vigilance and energy if they are to win public confidence. This has on occasion been lacking.
“The creation of the FCA and the PRA has been an opportunity to build something much better. This is still work in progress, particularly at the FCA.”
HBOS, which was formed from the merger of the Halifax and Bank of Scotland in 2001, expanded too rapidly and lent recklessly before the credit crunch and financial crisis struck.
The bank, which employed several thousand staff in Calderdale at sites including the former Halifax corporate centres in Trinity Road, Halifax, and the Copley Data Centre at Wakefield Road, was eventually merged into the newly formed Lloyds Banking Group as part of a tax-payer backed bail out.
A Treasury spokesperson said they have reformed the sector and addressed all the failings highlighted in the report.
They added that the department will look at the committee’s recommendations but in 2014 had found that separating enforcement was not appropriate.