The ex-bosses of failed British bank HBOS bear "ultimate responsibility" for its 2008 collapse, an official report concluded on Thursday, and will now face a new regulatory probe.
The report, published the Financial Conduct Authority and the Bank of England's Prudential Regulation Authority, blamed senior HBOS management -- but also slammed inadequate regulation from the now-defunct Financial Services Authority (FSA) watchdog.
"Ultimate responsibility for the failure of HBOS rests with its board," read the damning report.
"However, another striking feature of HBOS's failure is how the FSA did not appreciate the full extent of the risks HBOS was running and did not take sufficient steps to intervene before it was too late."
It added: "The board and senior executive management of HBOS failed to set an appropriate strategy, and also failed to challenge a flawed business model that placed inappropriate reliance on continuous growth without due regard to the risks involved".
Halifax Bank of Scotland (HBOS) was saddled with toxic property investments and was rescued by Lloyds TSB in a 2008 takeover that was brokered by the then-Labour government.
However, after the ill-fated deal, Lloyds Banking Group (LBG) then received a vast state bailout at the height of the global financial crisis.
The government took an initial 39-percent stake but this has since been cut to 25 percent.
Independent lawyer Andrew Green, who partly wrote the report, said the FSA failed to conduct a broader investigation into senior executives.
"The scope of the FSAâs enforcement investigations in relation to the failure of HBOS was not reasonable," Green wrote.
"The decision-making process adopted by the FSA was materially flawed."
He added that there is "plainly a public interest in this being considered afresh".
So far, ex-director Peter Cummings -- who ran the commercial arm at HBOS -- is the only boss to be investigated and penalised by the FSA. He was fined in 2012 and banned for life from working in London's financial district.
Green said Thursday that regulators must consider whether other former senior managers -- including ex-chief executive Andy Hornby and former chairman Dennis Stevenson -- should also be probed.
The FSA watchdog was replaced in 2013 by the PRA, which oversees banks, while the FCA was created to oversee consumer protection.
The two regulators added Thursday that they would now review "whether further enforcement action should be taken" and publish their findings early next year.