Former HBOS executives represented by Ashurst have defended their actions after the conclusion of a report into the failure of the bank by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).

Ashurst dispute resolution partner Edward Sparrow has been acting for eight of HBOS’ former non-executive directors for the past three years. He has been working alongside partner David Capps, with the pair having to give evidence to the PRA, FCA and Parliamentary Commission on Banking Standards (PCBS). 

Ashurst’s clients include former HBOS group chairman Lord Stevenson, audit committee chairman Anthony Hobson and Morrison & Foerster alumna Kate Nealon. Nealon was group head of legal and compliance at Standard Chartered prior to joining HBOS. 

In response to the report published by the PRA and FCA, the firm said the former non-executive directors of HBOS “disagree with a number of the conclusions of this report, particularly the way in which it downplays the unforeseen and unforeseeable effect of the financial crisis on HBOS”.

The statement adds “the report does not contain evidence that would justify any further enforcement action against executives”.

The PRA and FCA review, published yesterday (19 November) concluded that responsibility for the failure of HBOS rested with the board and senior management. It said they “failed to set an appropriate strategy for the firm’s business and failed to challenge a flawed business model, which placed inappropriate reliance on continuous growth without due regard to risks involved”.

As part of the review, Blackstone Chambers’ Andrew Green QC was asked to provide an independent assessment of whether the decisions taken on enforcement by the former Financial Services Authority were reasonable. 

Green, who was assisted by fellow Blackstone barristers James Segan and Simon Pritchard, concluded that the FSA’s enforcement investigation “was not reasonable” and that it “should have conducted an investigation… wider in scope than merely the conduct of Mr Cummings.”

Peter Cummings was HBOS’ CEO of the corporate division, and disciplinary and prohibition proceedings were brought by the FSA against him after the 2009 investigation. 

As a result, Green has recommended that the PRA and FCA “should now consider whether any former senior managers of HBOS should be the subject of an enforcement investigation with a view to prohibition proceedings”.The PRA and FCA will conclude a review as to whether enforcement action should be taken next year. 

Ashurst has a longstanding relationship with HBOS, which merged with Lloyds in the aftermath of the 2008 banking crisis.

Former Financial Services Authority (FSA) general counsel Andrew Whittaker played a small role in the FSA’s handling of the HBOS collapse, with the PRA and FCA report revealing that Whittaker spoke to HBOS in September 2008 after a fall in its share price as the bank was trying to reassure investors that it was well-funded.

Whittaker later left the FSA to join Lloyds as general counsel on a two-year fixed-term contract. He was replaced by Kate Cheetham earlier this year.