“We’re creating a Great British bank”
November 10th, 2009
One of the great unanswered questions about Lloyds TSB’s rescue takeover of HBOS which, despite the claims made in the above video, is the extent to which the Lloyds board was ‘hoodwinked’ by the board of HBOS.
During the heated talks in the Halifax company flat in St James on September 16th-18th 2008, how candid were HBOS’s chairman Lord Stevenson (sitting in the audience alongside Lloyds’ spinmeister Shane O’Riordain in the above video, taken at the acquisition press conference on September 18th, 2008), chief executive Andy Hornby (shell-shocked and incoherent after three days of high anxiety) and finance director Mike Ellis (a man with a predeliction for burying bad news)?
For example: did the HBOS directors bother to inform Lloyds chairman Sir Victor Blank and chief executive Eric Daniels about hideous state of the £116bn loan book built up by Peter Cummings?
I hope that the FSA’s current investigation into the “accuracy and completeness” of information provided by HBOS to investors during the Scottish bank’s 2008 capital-raisings (which I revealed in a “scoop” published by the Independent on Sunday last weekend), which is focused on the level of disclosures about the state of HBOS’s corporate book, will stretch to examining whether the Lloyds’s board was also kept in the dark about Cummings’ radioactive legacy.
One also wonders whether the estimated £70bn of bad debts in Cummings’s £116bn loan book, together with the existence of alleged internal frauds including that at BoS Reading were mentioned in the “secret dossier”, whose existence first emerged during the Lloyds/HBOS Competition Appeal Tribunal last November?
At a court hearing to rubber-stamp the ’scheme of arrangement’ by which Lloyds TSB acquired HBOS on January 12th 2009, counsel for Lloyds James McNeill, QC became agitated and puce in the face when economist Robert McDowell started speculating as to the contents of this dossier. David Sellar, QC for HBOS subsequently claimed all copies of the dossier had been “destroyed”.
If Gordon Brown’s government failed to disclose the facts it knew about HBOS to the Lloyds board or to Lloyds’s shareholders at the time of the deal, wouldn’t the government be guilty of prioritizing “financial stability” over mandatory stock market disclosures and respect for shareholder rights? Or have I missed something? And what about Victor Blank? Did he do the same?
An article by Peter Oborne published in February 2009 suggested that Victor Blank deliberately downplayed the noxious state of HBOS loan book. Instead Blank — a crony of Brown’s who had his eye on a peerage — saw his priority as being to do the prime minister’s bidding. Basically, it seems, Blank agreed to acquire HBOS in order to relieve the Labour government of the embarrassment of having to nationalize it.
- For more on Lloyds / HBOS, click here
- To read FT Aphaville’s endorsement of Ian Fraser’s coverage of HBOS click here
November 14th, 2009 at 1:55 am
Very good point Mr Fraser and one the FSA should be considering. The secrecy surrounding HBOS and its real status at the time of its rights issue and subsequent merger, is getting very worrying. I have always thought this lack of transparency was designed to hide what the executives at HBOS did. But the secrecy has been even more intense since the top execs left, to the point Lloyds now seems quite frantic in their denials about HBOS.
Additionally, it has been a continual source of amazement that no one in the government is prepared to answer any questions on the subject of the HBOS merger except to say what a great deal it was. On the subject of HBOS Reading, no one in the Government seems prepared to say anything at all.
Perhaps the answer to this mystery was in the ’secret dossier’ and perhaps those answers and the fact they have been concealed, could have dire consequences for the government?
Interestingly, today’s announcement that the FSA will stay until 2014 and also that Hector Sants is warming to the idea of being deputy Governor of Bank of England (Lord Turner is already lined up to take over from Mervyn King), suggests, perhaps, some sort of accord between the FSA and the Conservatives. If this is the case then Hector Sants will surely have no trouble being very scary about the ’secret dossier’ and also have no trouble hanging Government ministers out to dry for its contents.
The plot surrounding this Great British Bank the Government and Eric Daniels have built, thickens. Any superlatives to add Mr Daniels?
December 19th, 2009 at 1:44 pm
[...] i.e Eric Daniels is on film saying what "an enormously good deal" it was in January 2009 Ian Fraser – Business and Financial Journalist Ian Fraser Blog Archive
March 10th, 2010 at 12:24 pm
[...] Sept 18th, 2008: Lloyds TSB and HBOS formally announce the £12.2bn rescue takeover of the latter, and confirm that prime minister Gordon Brown has eased the path to a deal by agreeing to waive competition law. It later emerges that conversations between Brown and Lloyds chairman Sir Victor Blank (pictured left) about a tie-up had taken place at a Citigroup dinner in St James, London the previous Monday and, earlier, on a flight back from Tel Aviv. See Press Conference Video [...]