“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 press conference at which Lloyds TSB confirmed its acquisition of HBOS 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

Short URL: https://www.ianfraser.org/?p=965

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4 Comments for ““We’re creating a Great British bank””

  1. […] 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

  2. […] 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 […]

  3. […] board-level directors at HBOS including former chairman Lord Stephenson, former chief executive Andy Hornby and former head of corporate Peter Cummings ought to be […]

  4. […] that board-level directors at HBOS including former chairman Lord Stevenson, former chief executive Andy Hornby and former head of corporate Peter Cummings ought to be […]

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