Monthly Archives July 2012

LIBOR Scandal Holds Key to £24 Billion Llyods TSB Shareholder Case

Interesting news article suggests: a low borrowing rate gave false impression of HBOS solvency

Angry Lloyds shareholders say the Libor scandal is more proof they were mislead into voting to take over HBOS.

They have instructed lawyers to incorporate in their claim against Lloyds TSB directors the allegation that they knew that HBOS’s real interest rates were not being quoted at the very time that the directors of Lloyds TSB were recommending a merger with the stricken bank.

Lloyds Action Now (LAN) has been campaigning for the past three years for compensation for the 800,000 private shareholders who lost up to 90 per cent of their investment as a result of the deal.

LAN says the declaration by HBOS of interest rates lower than banks that were not in nearly as dire a financial state as itself was a deliberate attempt to hide the depth of the crisis from shareholders and that Lloyds TSB directors ought to have disclosed this.

“On 18th September 2008 HBOS posted figures for LIBOR that were clearly completely false and misleading. We now know that HBOS was not able to borrow from other banks and had to be the recipient of loans of last resort from the Bank of England and the US Federal Reserve in staggering sums,” said Sir Andrew Watson, LAN chairman.

“Despite this HBOS pretended that it was able to borrow money from other banks on an unsecured basis at rates more favourable than, for instance, HSBC Bank could.

“Lloyds TSB directors closed their eyes to this, did not disclose the true position and even hid the fact HBOS had received massive secret loans to keep it afloat in the run up to the takeover.

“In fact we now know that on that very day, 18th September 2008, HBOS was in danger of not being able to open for business because it had run out of cash, could not borrow money and was only saved by staggeringly large secret loans of last resort”, Sir Andrew added. “It is a scandal of breathtaking dimensions.”

According to former Barclays Chief Executive Bob Diamond, questioned over Barclay’s own manipulation of interest rates, the Emergency Liquidity Assistance to HBOS was not £25.4 billion but a staggering £62 billion.

This money was secretly loaned to HBOS between the announcement of the merger in September 2008 and its completion in January 2009.

It was in addition to publicly known loans given to all banks to assist with cash flow during the banking crisis and only revealed by the Bank of England a year after the event.

Lloyds Action Now has nearly 9,000 members and is in final negotiations with litigation funders to bring its claim for a total of around £2 billion compensation to court.

The HBOS merger cost Lloyds shareholders up to £4 a share, according to LAN’s latest calculations. With 6 billion shares in issue the total value of the claim could therefore be £24 billion.

LAN is writing to members of the Treasury Select Committee this weekend suggesting they raise the issue of Libor and Lloyds at their hearing into the banking scandal.

“Bob Diamond gave the impression that ‘low-balling’ the interest rate hurt no-one. In actual fact it hurt 800,000 Lloyds TSB shareholders, the majority of them pensioners, who have lost their life savings,” a LAN spokesman said.