Calls for an investigation have emerged over allegations that senior HBOS bank managers took “clear, deliberate and documented” action to “conceal” a fraud.
Conservative MP Kevin Hollinrake (Thirsk and Malton) told the Commons he had received previously unreleased documents which examined the bank’s reaction to a fraud at their Reading branch. MPs heard the senior managers were allegedly aware of the fraud prior to Lloyds’s 2008 takeover of HBOS but action was taken to conceal the details.
Mr Hollinrake referred to individuals “named as culpable for non-disclosure” in the report before calling for an investigation into “serious concerns” raised against Lloyds and HBOS.
His remarks came during a parliamentary debate on redress for victims of banking misconduct and the Financial Conduct Authority, focused on the conduct of RBS Global Restructuring Group towards small businesses.
Lloyds rescued HBOS at the height of the financial crisis.
It has been in the process of paying victims of fraud at the hands of HBOS Reading staff between 2003 and 2007.
Speaking in the Commons, Mr Hollinrake said: “I have recently been sent by one of those convicted, Mr Michael Bancroft, which was kindly facilitated by (Nadhim Zahawi, Tory MP for Stratford-on-Avon), hitherto unreleased documents – including the Project Lord Turnbull report, authored by Lloyds senior manager Sally Masterton, which alleges that senior managers within the bank were aware of the fraud prior to the takeover and the £14bn Lloyds and HBOS rights issues, yet they took clear, deliberate and documented action to conceal it.
“Let’s be clear, if true, this would potentially make both rights issues and the takeover fraudulent. Those named as culpable for non-disclosure in the report include chief executive Andy Hornby, chairman Sir Dennis Stevenson, former CEO James Crosby, corporate CEO Peter Cummings and auditors and reporting accountants KPMG.”
He added: “Seniority, status or background cannot be a barrier to justice and to holding those to account who are ultimately responsible for the devastation caused to so many lives and to the wider economy.”
Mr Hollinrake went on: “The Project Lord Turnbull report raises significant questions – was there a deliberate concealment of the scale of the fraud within HBOS and Lloyds? Who was party to the concealment? Did the concealment crucially result in significant loss to bank shareholders and to subscribers to the rights issue? We see conflicts of interest in the report and in many other places – KPMG auditors giving HBOS a clean bill of health in February 2008, only a few months before its collapse.
“The audit watchdog, the Financial Reporting Council (FRC), seeing no reason to investigate this audit.
“The fact that four of the 10 members of the FRC board are partners at KPMG and that it is chaired by former Lloyds chairman, Sir Win Bischoff, who oversaw the £14bn rights issue.
“Our all-party group sets out clearly what steps we now need to take.”
He added the only way to resolve the “deep-seated cultural problems in our banking sector and to remove these conflicts of interest so prevalent is by way of a full public inquiry”.