FSA to investigate HBOS for credit crunch failings

The Financial Services Authority is to investigate the failings at UK bank HBOS during the credit crisis, the FSA's chairman Adair Turner said in a letter released this week.

The letter, addressed to parliament's Treasury Select Committee Chairman Andrew Tyrie and dated July 11, said the FSA planned to start work on a report into HBOS's problems, which led to HBOS being taken over by Lloyds Banking Group in a government-backed rescue deal.

"We would intend to begin work on a report into HBOS, providing an account of the developments over the years preceding the crisis which put HBOS in an unsustainable position in autumn 2008, and identifying any deficiencies in the FSA's regulation and supervision of it," said Turner's letter.

The FSA is already working on a probe into the near-collapse of Royal Bank of Scotland. The report is due to be published later this year but has been held up due to legal issues.

The problems at RBS and the Lloyds group after it took over HBOS led the British government to bail out and rescue both banks with billions of pounds of taxpayers' money, with Britain ending up with an 83 percent holding in RBS and a 41 percent stake in Lloyds.

Lloyds was saddled with billions of pounds of losses after its takeover of HBOS, in a deal which was brokered by the Labour government at the time.