Watchdog plans investigation into HBOS and RBS

The City watchdog is preparing for an investigation into the events which led up to the near collapse of high street banks RBS and HBOS, according to the Sunday Telegraph.

The investigation is not expected to address market-wide issues, rather a range of issues including the banks’ risk management processes and the conduct of directors.

The paper said it is also expected to scrutinise directors’ competence during the periods leading up to rights issues that were undertaken by Bradford & Bingley, HBOS and RBS over the course of several months last year.

If the investigation goes ahead it will serve as a further reminder to consumers of the heavy public cost of bank rescues, in the case of RBS a £20 billion bail-out from the taxpayer and in the case of the merger between Lloyds TSB and HBOS several billion more.

With consumer feeling at an all time high, such an investigation would be timely.

Report of the inquiry comes just a fortnight after 88-year-old Vera and 90-year-old Robert Petrie won back more than £87,000 in redress from HBOS after financial planner Phil Melville enlisted the help of New Model Adviser's Build Better Banks campaign, catapulting bank advice practice firmly into the spotlight.

A spokesperson at the Financial Services Authority (FSA) declined to comment.