Will FSA take action against HBOS?
There were two huge British banking casualties of the great crash of 2008: Royal Bank of Scotland, rescued by taxpayers, and HBOS, rescued by Lloyds' shareholders and taxpayers.
The destruction of wealth - that of investors, including more-or-less anyone saving for a pension - has been savage, running to tens of billions of pounds in each case.
But for RBS, the Financial Services Authority as watchdog has already ruled - just before Christmas - that there was no wrongdoing.
The calamitous takeover of the rump of ABN in 2007, which did for RBS, was the consequence of misjudgements by the banks' directors that were appalling but within the rules. Or at least that is what the FSA has concluded.
And the FSA concedes that its own regulatory oversight of the risks being run by RBS was woeful.
We should learn more about all of this in the spring, when the FSA is to publish (after politicians and press screamed for a document) a bowdlerised account of its investigations into whether RBS and its directors deserved to be punished.
I should point out that one of the gaps in this report will be the absence of testimony from directors of Barclays.
This is not a trivial obstacle to understanding why RBS's directors drove their bank towards the edge of the cliff - in that some would argue that Barclays' board was doing something similar in 2007.
You'll recall that Barclays was bidding in a competition with the consortium led by RBS to buy ABN. To the great good fortune of Barclays and its owners, Barclays lost the bidding war.
But it would certainly be instructive to have a sense of why Barclays' directors were - like RBS's - apparently so desperate to overpay for a bank, ABN, that turned out to be something more poisonous than the curate's egg.
If banks are to avoid this kind of takeover debacle in future, insights from the boardrooms of both RBS and Barclays would be helpful.
However the FSA has neither the time nor the powers to extract the relevant testimony from Barclays. So we won't get it.
What of HBOS? What will we learn about how and why it made such mind-bogglingly poor loans to businesses, especially to property companies?
Here's the measure of the disaster at HBOS. Between the beginning of 2008 and the end of 2009, the losses on loans made by Lloyds and HBOS combined were £39bn - of which the vast bulk was contributed by HBOS (which became a part of Lloyds two years ago).
Now, much of what went wrong at HBOS was old-fashioned lethal exuberance about lending to property developers. It's not dissimilar to the madness that infected and harmed all of Ireland's major banks.
There have been a couple of decent official reports into the Irish banking meltdown. Something similar for HBOS - given that taxpayers have lent and invested over £100bn in keeping its new owner, Lloyds, afloat - would be seen by many as wholly appropriate.
But what detail the FSA can disclose about HBOS's near demise will depend on whether it finds strong evidence that HBOS and its directors broke the rules - and whether, to use the jargon, the FSA decides to take enforcement action against HBOS.
The former directors of HBOS will be concerned that - unlike what has happened at RBS - they haven't yet been given a clean bill of health by the FSA.
They will also be aware that what went wrong at HBOS was qualitatively different from what went wrong at RBS.
At RBS, its doom was sealed by the reckless decision of its directors to carry out a takeover (of the rump of ABN) that shrunk its stocks of loss-absorbing capital and liquid resources to the regulatory minima, and also made the huge bank far too dependent on unreliable short-term wholesale funding.
RBS went down (or rather it would have collapsed had it not been for taxpayers' financial support) because it made a strategic misjudgement at the highest level of the organisation that there would not be a serious economic downturn and that other banks and financial institutions would not stop lending to it.
So, for example, it allowed its equity capital to shrink to one fiftieth of its loans and investments - which may well have been crazily dangerous, but was consistent with the global Basel rules on capital adequacy.
Which is why the FSA would say the imperative has been to reform and mend the Basel rules, but that there is no basis for prosecuting RBS's directors.
At HBOS, something different happened. It lent tens of billions of pounds to companies - especially those with property interests - which have proved unable to keep up the payments and honour their debts.
The big question prompted by the sheer scale of the losses disclosed by Lloyds (as HBOS's new owner) from the beginning of 2009 onwards is whether HBOS could and should have revealed more and at an earlier stage about the problems being experience by those to whom it had lent.
Apart from anything else, the UK commercial property market was already in a dire state many months before Lloyds agreed to buy HBOS in the autumn of 2008.
For the avoidance of doubt, it is too early to say whether the FSA will find that HBOS breached important rules on the disclosure to investors of material financial information.
But the conspicuous fact that the FSA has not yet given HBOS a clean bill of health is not trivial.
Update 16.30: Here is the crux of what the FSA is looking at.
In the accounting period from the beginning of July 2008 to the end of June 2009, impairment losses for HBOS (losses on loans it had made) were around £21bn.
So that's £21bn of loan losses in a single year, of which the vast bulk came from poor quality loans to property-related businesses.
How credible is it that £21bn of losses can crystallise as fast as that?
Does that show failure of the accounting rules - which is what Tim Bush, the former Hermes fund manager, argues.
Or should HBOS have told its shareholders before the end of 2008 that a good portion of its corporate loans were looking a bit sick.
This is what Lloyds said about £7bn of loan impairments that Lloyds disclosed in a trading update on February 13 2009:
"The impairments are, principally as a result of applying a more conservative provisioning methodology consistent with that used by Lloyds TSB, and reflecting the acceleration in the deterioration in the economy, some £1.6bn higher than our expectations when we issued our shareholder circular at the beginning of November last year."
Does that reference to a "more conservative provisioning methodology" imply that HBOS should have disclosed at least some of the loan losses rather earlier than it in fact did?
The FSA will adjudicate on all this.
PS. Barclays (no surprise here) is keen for me to point out that the value of its offer for ABN was significantly lower than that made by the RBS consortium. And Barclays was mainly offering shares, rather than precious cash. So its board behaved less recklessly than RBS's.
But Barclays does not dispute that it should probably say a little prayer of thanks more-or-less every waking minute that it did not end up as the owner of ABN.