UK lawmakers call for probe of Lloyds, KPMG over HBOS fraud

LONDON: British lawmakers called for an investigation by law enforcement and regulatory agencies into the handling by Lloyds Banking Group of a fraud at its HBOS Reading unit more than a decade ago and into the role of auditor KPMG.
The call by the All Party Parliamentary Group (APPG) on Fair Business Banking comes after the publication online on Tuesday of an internal 2013 report alleging serious misconduct by the lender over the handling and disclosure of the fraud.
The lawmakers said allegations that HBOS had concealed the fraud, one of Britain’s worst-ever banking scandals that saw six people jailed for a total of 47 years last year, should be subject to “full, forensic and expeditious investigations by regulators”.
Lloyds reiterated the bank’s statement that the internal 2013 report had been provided to Britain’s Financial Conduct Authority (FCA) and to the police in 2014. “We strongly refute the allegations with regards to KPMG’s knowledge and involvement in the report, which we believe to have no basis in fact,” a KPMG spokesperson said.
“We have cooperated fully with the detailed investigations undertaken, including those by the PRA / FCA and the FRC (watchdogs), none of which concluded that our work did not meet the applicable audit standards of the time.”
The internal report by Scottish businessman Neil Mitchell, a frequent critic of Britain’s big banks, alleged that HBOS executives knew of the fraud as early as 2004 and failed to properly disclose it, with far-reaching implications given Lloyds’ takeover of HBOS in 2009.
Lloyds did not address the substance of the report’s allegations that it misled investors over its financial health by not disclosing the fraud earlier. Britain’s financial watchdog is conducting a probe into HBOS and what its executives knew of the fraud, while a retired judge is probing whether Lloyds then properly investigated the incident after it brought HBOS in 2009.— Reuters