Former top accountant John Griffith-Jones has defended how his firm checked the books of HBOS before the bank had to be rescued in the financial crisis, saying nobody saw what was coming.
Appearing in front of the Treasury select committee, where he faced questions over his new job as chairman-designate of the Financial Conduct Authority (FCA), Griffith-Jones said: “The accounts of HBOS did bear a sense of reality. Had it been known, the accounts would have been qualified.”
Griffith-Jones is the former chairman of the UK arm of “big four” accounting firm KPMG, which audited HBOS. The lender had to be taken over by Lloyds for £12 billion in January 2009 and the enlarged group is now 40 per cent owned by taxpayers.
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 to regulators.
The FCA is set to replace the Financial Services Authority (FSA), which is being scrapped next year under reforms aimed at plugging gaps highlighted by the 2007-09 crisis.
An FSA report into the rescue of HBOS is due to be released by the middle of next year.