LONDON Nov 6 A former top accountant defended
how his firm checked the books of HBOS before the bank was
rescued in the financial crisis, saying nobody saw what was
HBOS had to be taken over by Lloyds in January 2009
for 12 billion pounds ($19.2 billion) and the enlarged group was
bailed out by the UK taxpayer who now has a 40 percent stake.
"The accounts of HBOS did bear a sense of reality," said
John Griffith-Jones, who headed the UK arm of KPMG,
one of the world's "Big Four" accounting firms, which audited
Griffith-Jones was responding to questioning from a group of
legislators about his new job as chairman designate of the
Financial Conduct Authority (FCA).
"Had it been known, the accounts would have been qualified,"
Griffith-Jones told the UK parliament's Treasury select
The accounting industry is under scrutiny for giving banks a
clean bill of health just before many were rescued and the
sector faces reforms to make auditors more sceptical of what
clients tell them and more willing to express concerns directly
The FCA will replace the Financial Services Authority (FSA),
which is being scrapped and its banking supervisory powers
handed to a unit at the Bank of England. The reform is aimed at
plugging supervisory gaps highlighted by the 2007-09 crisis.
A report by the FSA into the rescue of HBOS is due to be
released in the middle of 2013.
Lloyds is one of Britain's "Big Four" lenders and lawmakers
are pushing for new challengers in the market in the hope this
will create increased competition to the benefit of consumers.
For the time being, though, banking is seen by many as not
competitive enough, symbolised by difficulties in moving
accounts from one lender to another. Switching accounts was "six
weeks of pure hell", one lawmaker said.
Just six weeks into the job as non-executive chairman of the
FCA, which will be launched in April, Griffith-Jones said he had
not changed his bank account for 50 years.
The FSA will present a report next month on making it easier
for challenger banks to get authorisation, such as by scaling
back initial capital requirements.
But there was no quick fix to increase lending to the
economy, which would depend on existing banks in the near term.
As non-executive director working a three-day week,
Griffith-Jones will leave FCA Chief Executive Martin Wheatley to
run the show while he focuses on creating an effective board.
He favours a set of easily understood financial products as
Britain seeks to put an end to costly mis-selling scandals.
"If we treat everyone as if they can't add up, then we
create a whole bundle of cotton wool. If we don't do anything,
then we have people disadvantaged in the less numerate category.
We have to make sure there are simple products everyone can
understand at one level," he said.