Well, after a long wait, the report into the fall of HBOS was published last week by the FCA and PRA of the Bank of England (BOE). All 500 pages should make good reading and will probably require more than one blog. However, early insights from this report generate two related themes: first, validating the board's understanding of risk appetite and risk taking; and secondly, balancing ambitious credit growth plans with the firm's actual risk culture given it equity and funding profile. Indeed, maturity transformation appears to have a played a role in the unwind of the bank.
It should be interesting to observe the nature of the role of the BOE in this episode too, including the reported £50 billion life line granted to the bank over a series of liquidity auctions and liquidity schemes from 2007 into the autumn of 2008. Early signs are that HBOS used about one-third of the £75 billion in special liquidity schemes and later emergency loans granted by the BOE. Considering the fall of HBOS in this light, this was a more of a slow burning car crash rather than a bolt out of the blue.
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