HBOS report will make painful reading for regulators and former bank chiefs

More than seven years after it was bailed out by the British government at the height of the banking crisis, HBOS will once again be dominating the headlines as the long-awaited report on its collapse finally sees the light of day.

At midday tomorrow, Bank of England regulators will publish the 500-page report into what went wrong at the bank, along with a separate 100-page review, written by an independent QC, Andrew Green, of how the authorities handled the crisis and its aftermath.

Britain’s biggest mortgage lender HBOS was taken over in a government-brokered rescue by Lloyds TSB in September 2008 but had to be bailed out with £20 billion of taxpayers’ money just weeks later as its bad debts spiralled out of control.

The report, commissioned in 2012, is being published two years later than originally scheduled, delayed by a raft of challenges from the bankers whose conduct it investigated.

Under a process known as "Maxwellisation" – named after the late Robert Maxwell who successfully sued the Department of Trade after it published a critical report into his activities almost half a century ago – those mentioned in official reports must have the chance to respond.

With more than 200,000 documents reviewed by the HBOS investigators, this has proved a lengthy process. While the report was completed 18 months ago, since then there have been some 1,500 representations from as many as 35 of the bank’s former executives.

Much of the report will make familiar reading, as those in charge at the time have already been severely criticised for their conduct. In April 2013, the Banking Standards Commission, in a report entitled An Accident Waiting to Happen, accused former chief executives Sir James Crosby and Andy Hornby, along with former chairman Lord Stevenson, of a "colossal failure" of management.

But it is the detail that will be pored over – as well as what happens next. Two years ago the Banking Commission said financial regulators should consider banning the HBOS trio and also had harsh words for the regulators themselves.

Auditors, KPMG, are also likely to come in for criticism.

Only one HBOS banker has faced financial penalties for his part in the bank's ruin – Peter Cummings, former head of corporate lending, who was fined £500,000 in 2012 and given a lifetime ban from working in the financial services industry.

The report is expected to question why regulators did not take action against other executives.

Blame will certainly be the name of the game tomorrow and the report will make extremely uncomfortable reading for the bank’s former executives and the regulators in charge of overseeing them at the time. But for those shown to be responsible for the collapse of the bank, whether through incompetence, hubris or downright dishonesty, the report won’t be quite as uncomfortable as it might have been had it been released on time.

None of those involved will face fines for their wrongdoing, as regulators are obliged to give notice of penalties within six years of the offence.

That statute of limitations expired last year – 12 months after the report should have been released.

Hard discounters

When

Aldi

and

Lidl

first moved into the UK in the early 1990s, the big domestic players that then dominated the lucrative grocery market didn’t take much notice.

Although some industry experts warned that the arrival of the “hard discounters” would be a game-changer for the food retail industry, nothing much happened for a couple of decades.

Established supermarket groups such as Tesco and Sainsbury's carried on pretty much as they had before, in a sector enjoying some of the fattest profit margins in the world.

But then the Big Four took their collective eye off the ball, allowing their prices to drift higher and their service to slide.

The discounters stepped up their pace of expansion and now, 25 years after Aldi first opened its doors in the UK, it has reached a notable milestone in its assault on the UK supermarkets sector, carving out a combined market share of 10 per cent.

Their double-digit market share – 5.6 per cent for Aldi and 4.4 per cent for Lidl – is up from 5 per cent just three years ago, according to latest figures from Kantar Worldpanel.

Among the Big Four of Tesco, Sainsbury's, Asda and Morrisons, only Sainsbury's managed to grow its sales in the last quarter.

They might have had a slow start, but the discounters now claim £1 in every £10 spent in UK supermarkets. The Big Four are certainly taking notice now. Fiona Walsh is business editor of theguardian.com