It is surely right that the UK accounting watchdog is to give at the very least preliminary scrutiny of whether accountancy giant KPMG was derelict in its duty in the way it audited the books of HBOS before the bank went belly-up in the 2008 financial crash.
Lloyds bailed HBOS out through an emergency takeover where Gordon Brown’s UK government was the handmaiden. Then Lloyds, taking all the detritus of the over-expansionary HBOS onto its books, had to be bailed out with £20 billion from the taxpayer.
Official reports have lambasted HBOS’s former executives, such as James Crosby and Andy Hornby, and chairman Lord Stevenson as the chief culprits of HBOS’s downfall, while banning only Peter Cummings, the former head of its gung-ho commercial lending unit.
Various individuals appearing at the Treasury select committee in the lengthy wake of the disaster have spoken of lax financial controls at the lender, and a climate where caution was not greeted warmly. There was too much group-think at the top, and most of it not informed by banking expertise.
But KPMG seems to have escaped largely unscathed by most of the official criticism. This is strange given that, as the bank’s independent auditors, it was more than anyone supposed to provde robust external monitoring and questioning of the numbers.
And eventually HBOS’s number was up. It was one of the worst collapses in British corporate history. There is currently a major shareholder legal action against Lloyds as to what it knew about how bad HBOS’s financial state was when it sought capital and backing from its investors for the distress acquisition.
It is surely every bit as important to examine how much KPMG knew. Lloyds had to rely on due diligence. KPMG had privileged and lengthier access to HBOS’s financial innards. The Financial Reporting Council, the professional body for the accountancy industry, may now perform a public service.
This is not to suggest anyone is guilty of anything. But not a few people have remarked that two things stand out as noteworthy from the financial crisis. No bankers went to jail for the crash, and no accountants have been deemed culpable when they were very close to the action.