The Institute of Directors has said that the publication of the PRA/FCA report into the failure of HBOS shows the importance of having experienced and strong company directors round the board table.
Oliver Parry, Senior Corporate Governance Adviser at the Institute of Directors, said:
“Today’s report is a timely reminder that when directors fail, companies fail. HBOS may have been swept up in a global financial crash, but the regulators are clear that a lack of expert oversight from the HBOS board made it ‘inherently vulnerable’.
“Banking regulation is much tougher now than it was in 2008, but this should not lull us into a false sense of security. Banks live and die by the strengths of the directors sat around the board table, particularly the ability of non-executives to challenge management decisions. Increased capital requirements and ring-fencing the investment arms of banks will not stop financial crises happening.
“There is justifiable anger that, so far, only one HBOS executive has been reprimanded for his involvement in its failure. The regulators have plans for further investigations and it is in everyone’s interest for these to be completed much quicker than the seven years we have waited for this one.
“But we must be careful not to confuse the roles of executive and non-executive directors. The HBOS failure makes it more clear than ever that proper independent oversight from experienced and hard-headed non-executive directors can help to prevent future crises. Making non-execs personally accountable, as the current Senior Managers Regime does, could deter the very best from taking on the role in the first instance. This would be a dangerous mistake."