The main City regulators have warned former managers of HBOS that they faced possible fines and being banned from the Square Mile after they broadened their investigation into one of Britain's most infamous bank failures.
The Financial Conduct Authority and the Prudential Regulation Authority said a review of staff conduct before the £47bn of losses that came to light in 2008 would go beyond the top bosses identified in a previous inquiry.
Setting out the detailed terms of reference for the investigation, they said officials would look into "whether the regulators should consider afresh whether any other former members of HBOS's senior management should be subject to investigation with a view to prohibition proceedings".
The much-delayed attempt by regulators to review what was arguably Britain's most reckless bank before the financial crisis has frustrated MPs and the public.
Last year the parliamentary commission on banking standards published an official report that was deeply critical of the chairman Lord Stevenson, chief executive Andy Hornby and his predecessor James Crosby, saying their "toxic" mistakes had led to the "colossal failure" of the bank.
Andrew Tyrie, the Conservative MP who chaired the commission, suggested that further sanctions could be needed, saying: "Those responsible for bank failures should be held more directly accountable for their actions and face sanction."
So far the regulator has only fined and banned Peter Cummings, the former head of its commercial property arm which ran up debts of more than £20bn.
Cummings fought the regulator, saying that he conducted his business in good faith and never foresaw the credit crunch, but he was fined £500,000 and banned for life from working in the City.
Stevenson, Hornby and Crosby have all faced parliamentary humiliation under questioning by MPs. Crosby was stripped of his knighthood and resigned as a regulator, Hornby handed back some of his income and Stevenson left the City.
In the aftermath of the report, the business secretary, Vince Cable, threatened to review their conduct with a view to possibly banning them as company directors.
However, they have never faced sanction by regulators and any further action was delayed after the government announced that the Financial Services Authority, which started the inquiry, would close and hand over to its two successors.
Crosby, who sold two-thirds of his shares just before the banking crisis hit and the bottom fell out of their value, has continued to receive a pension, expected to be almost £700,000. Hornby continues to play a part in business life and enjoys a £240,000 HBOS pension.
The regulators said the FSA was only allowed to begin its review of staff culpability in September 2012 while it waited for its own assessment of the bank's failure to be completed. They said a decision on which directors to pursue would be made before the end of the year and would include a full report on why HBOS failed and which agencies were to blame.
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