KPMG Audit of HBOS To Be Probed

Accounting experts seek independent probe into KPMG’s audit of HBOS - https://t.co/iLxuKeS2as https://t.co/nDzZX0CRiE via @FT

— Harriet Agnew (@HarrietAgnew) January 26, 2016

Crosby Damage Limitation

Sir James Crosby et al are now on a damage limitation exercise, albeit one that is portrayed as being contrition and repentance.

Sir James has asked to have his knighthood removed, and has offered to give up 30% of his £580K per annum pension.

The Telegraph quotes him saying that he was "deeply sorry for what happened at HBOS and the ensuing consequences for former colleagues, shareholders, taxpayers and society in general”.

Andry Hornby, who succeeded Crosby in HBOS in 2006, is under pressure to do something similar.

All very well, maybe but will it be enough to avoid further investigations/retribution?

Peter Cummings Fined £500K

The FSA has fined former HBOS director Peter Cummings £500K, and banned him for life from working in the City.

Tracey McDermott, director of enforcement and financial crime at the FSA is quoted in the Telegraph:

“Despite being aware of the weaknesses in his division and growing problems in the economy, Cummings presided over a culture of aggressive growth without the controls in place to manage the risks associated with that strategy.

Instead of reacting to the worsening environment, he raised his targets as other banks pulled out of the same markets." 

However, do not shed too many tears for Cummings, Cummings left HBOS in 2009 with a payout of £600K; so he's still £100K up on the deal!

Did Brown Create a False Market?

When Gordon Brown persuaded Lloyds to take on the wreck of HBOS, he put his "reputation" on the line.

This "reputation" was placed even more on the edge of the precipice, when it became apparent that HBOS was on the verge of collapse.

How surprising then, that at that very moment, the Bank of England bailed HBOS out with a secret (secret to the public and shareholders) loan.

The question is, did Brown create a false market in the shares in order to save his "reputation"?

The Secret Loans

Two of Britain's once respected banks stood on the precipice of collapse last year. Had they collapsed the UK's banking system would have ground to a halt (even cash dispensers would have ceased dispensing cash).

As such the Bank of England stepped in with an emergency loan of £62BN, to Royal Bank of Scotland (RBS) and HBOS during October and November 2008.

Mervyn King, Governor of The Bank of England, revealed the secret loan during a parliamentary hearing today. The money was repaid in full by January 2009.

I wonder if, had the responsibility for issuing the loan rested with Brown, whether such a decision would have been made (given Brown's dithering and inability to make decisions)?

"Ironically", the shareholders of HBOS and Lloyds were not told about this (ie given the full picture of the shocking sate of the banks' finances), when they were offered shares in earlier rights issues by HBOS and LLoyds in January 2009.

Suffice to say, they may well have grounds for "complaint" against the boards of these two banks.

Lloyds Takes More Taxpayer Money

Lloyds Banking Group, the once proud bank that was wrecked by Gordon Brown when he persuaded its board to take over the toxic HBOS, is draining the taxpayer of even more money today.

Lloyds is raising £13.5BN via a rights issue. As such the government will be pumping another £5.7BN of our money into the bank, in order to maintain our current holding of 43%.

Lloyds wants the money so that it can avoid participating in the government insurance scheme for its bad debt.

The scheme would have protected Lloyds against worse than expected losses on its toxic assets. However, the government would have demanded a greater share in the bank in return.

I am sure Lloyds now bitterly regrets ever allowing itself to be persuaded by Brown to takeover HBOS.

Lloyds Job Cuts

Lloyds Bank, the 43% taxpayer rescued wreck of a once proud bank, has announced that it will cut a further 5,000 jobs by the end of next year.

Lloyds, at the behest of Gordon Brown, rescued HBOS last year at the height of the banking crisis; it now faces having to "eliminate" a total of 12,500 jobs from a total of 129,000 staff employed in Britain.

Meanwhile HSBC and Barclays both issued positive trading statements, in which they claimed the rise in bad debts has peaked and profits are sustainable.

Lloyds May Give Up Halifax

The European Commission, in the guise of Neelie Kroes (the Competition Commissioner), has warned that Lloyds Banking Group may have to split off Halifax as punishment for the state aid that it received in 2008.

Gordon Brown waived competition rules in September 2008 in order to allow Lloyds to take over HBOS in a rescue deal. Although this will be deemed yet another personal blow to this deal that he orchestrated (ie he twisted arms to save his political skin), splitting off Halifax will increase competition within the banking sector.

Doubtless Sir Victor Blank, ex Chairman of Lloyds, who was conned by Brown into merging with HSBC and also paid a price as he was forced to stand down as chairman, will not be shedding any tears for Brown's hurt "pride" if the EU get their way.

Named and Shamed

The Financial Ombudsman Service (FOS) has finally had the guts to name and shame the worst offending financial services companies in the UK, being those companies that have logged the highest number of customer complaints.

Congratulations to the five major high street banks, which account for the majority of the complaints.

The big five have managed to notch up a staggering 38,286 complaints, out of a total of nearly 70,000 received by the ombudsman in the six months to 30 June 2009.

- Lloyds (which includes HBOS) came top to the league of shame with 15,233 complaints.

- The Royal Bank of Scotland group scored 5,533 of the complaints received by the ombudsman.

- Barclays scored 8,283.

- Abbey scored 2,493 complaints.

- HSBC group scored 2,363 complaints.

- Alliance & Leicester scored 1,786.

The chairman of the FOS, Sir Christopher Kelly, was more than unimpressed. He is quoted:

"I will now be writing to the chairmen of the financial businesses that generate the largest proportion of our complaints workload, to ask them to consider very carefully both their own complaints performance – as reflected in the data we are publishing today – and the complaints performance of their competitors."

As I have noted many times before, the financial services sector in the UK treats its customers appallingly.

Why does it use the word "services" in its moniker, given that "service" is the one thing that it doesn't provide?

Lloyds Loses £4BN

Gordon Brown's state sponsored merger of Lloyds and HBOS has shown that he has the direct opposite of the "Midas Touch", as today the semi nationalised bank reported pre tax losses of £4BN for the first half of this year.

Sir Victor Blank, ex Chairman of Lloyds, who was conned by Brown into merging with HSBC has also paid a price as he was forced to stand down as chairman.

The lesson here is never trust Brown, and always perform a thorough due diligence before taking on anything offered by Brown/Labour.

Lloyds Axes Cheltenham & Gloucester (C&G)

Lloyds Banking Group is to close all 164 of its Cheltenham & Gloucester (C&G) branches in the UK, with the loss of up to 1,500 jobs.

This follows the disastrous merger earlier this year, set up by Gordon Brown, with HBOS.

There is one glimmer of "good" news, Andy Hornby (the ex CEO of HBOS who destroyed value at HBOS) has found work with Alliance Boots as their CEO (earning around £1M per annum).

I wonder if the soon to be ex employees of C&G will be equally fortunate?

Firing Blank

Sir Victor Blank (soon to be ex chairman of Lloyds TSB) made two fundamental errors when he jumped at the "opportunity" offered to him by Gordon Brown to take over HBOS (which of course also meant that Brown could dig himself out of an embarrassing hole and avoid the spectacle of HBOS going bust):

1 He did not conduct a thorough due diligence into the loan book of HBOS before completion.

2 He trusted Gordon Brown, and assumed that he would never be "hung out to dry" (which of course he has been).

Never trust a politician, least of all Brown!

Lloyds Bonuses

Lloyds, the bank rescued by the government after taking on the poison chalice of HBOS, has announced that it will be paying around £80M in bonuses.

Needless to say there has been a knee jerk reaction orchestrated by the government manipulated media. The government are keen to whip up a frenzy of anti bank feeling, lest its own role in the financial crisis be subject to excessive scrutiny.

However, before effigies of bankers be burnt in the streets, it is worth noting that the majority of the bonuses are being paid to ordinary members of staff, and that those senior members of staff eligible for bonuses may have to wait up to three years for them.

It should also be remembered that Gordon Brown "brokered" the HBOS deal, ie he twisted arms to save his political skin.

The government are as culpable as the bankers for this mess.

Gordon Brown - World Policeman

The truth is finally dawning on people that Gordon Brown has more than a little responsibility for the financial mess that we now find ourselves in, eg:

- The failure of his tripartite regulatory system to control the banks.

- The waste of public sector resources in good years on consultants, IT systems and other "initiatives" that have all failed.

- The massive increase in the size of the public sector, for precious little "real world return".

- The dithering over Northern Rock and the financially ruinous HBOS Lloyds merger/bailout.

- The £2Trillion debt resulting from his bank bailout plan.

Now that people and his own party have finally woken up to his role in this mess, there are those who seek to position themselves to takeover as and when he "falls" or is pushed onto his sword.

Harriet Harmon, so the media gossip goes, is lining herself up to takeover. The interesting add on to this "testing the water" gossip is that a story has surfaced that Brown is being touted by the German Chancellor, Angela Merkel, for a new job as a global financial watchdog.

God help us all if he were to assume that politically untenable position, given what he has done to the UK economy the damage he would do to the world economy is unthinkable.

Lloyds Shares Continue To Fall

Shares in Lloyds Banking Group fell further this morning (to around 54p) as investors digested the shock news released by Lloyds in the middle of Friday that their newly acquired bank, HBOS, lost £10BN.

The size of the loss and timing of the announcement was unexpected, and has raised fears that Lloyds will require a sizeable injection of capital from the government, ie nationalisation (the government already has a 43% stake in it).

It seems that HBOS continued to lend/invest in property deals long after other banks had stopped doing so. The person in charge of the division that squandered the money, Peter Cummings, left in January with a payout of £600K.

The added irony of this worse than worthless performance is that the CEO of Lloyds, Eric Daniels, only a few days ago had told the Treasury Select Committee that the acquisition of HBOS was "strategically a very good acquisition and will prove to be so in a couple of years".

Maybe so, but should he not have tempered his enthusiastic comments with a warning about the loss that they were due to report?

Surely Daniels knew about the loss at that stage?

A Failure of Regulation

The Times reports that the Financial Services Authority (FSA) claims that it raised concerns about internal risk controls at HBOS in 2002.

Yet nothing appears to have been done, why?

Moreover, why was Sir James Crosby (who has now resigned from the FSA), CEO of HBOS between 2001 and 2006, appointed deputy chairman of the FSA by Gordon Brown?

A Collective Spanking

Sir Fred Goodwin and Sir Tom McKillop, the former chief executive and chairman of RBS, will apologise for destroying one of Britain's leading bank at a meeting of the Treasury Select Committee today.

Also attending the trial by humiliation will be Andy Hornby and Lord Stevenson of Coddenham, the former chief executive and chairman of HBOS.

Whilst all of this may make the politicians feel important as they are seen to flex their muscles in the headlines, the very pressing questions of what to do about bonus payments in the future, and how to avoid a similar disaster needs to be addressed.

Chancellor Darling has promised a review. Unfortunately that will not be completed until the end of the year. Just in time for the next round of bonus payments!

We Are All Bankers Now

In a delicious irony, despite the mistrust and dislike of the bankers who have brought the country to the edge of financial collapse, the British taxpayer finds himself/herself owning 43% of a new "superbank".

The "superbank" has been formed out of the wreckage of the merger between Lloyds TSB and HBOS, which was rejected by investors (who only bought less than 1% of the shares offered by both banks).

Called To See The Headmaster

As predicted, despite the 1.5% cut in rates yesterday, the high street banks have been a tad tardy in passing on the cuts to their hard pressed borrowers.

Needless to say, the government is not best pleased as it will be blamed by the voters for this (not least because it now has effective control of a number of these banks).

Alistair Darling therefore summoned the CEOs of HSBC, Barclays, Lloyds TSB, HBOS and Abbey to Downing Street this morning to demand that they immediately pass on the rate cut to their customers.

Bradford & Bingley (B&B), Lloyds TSB and Abbey have now passed on the rate reduction.

I suspect that before the day is out, we will hear from the other banks that the rate cuts will be passed on.

The Bankers Strike Back

The major high street banks, never fearful of damaging their already trashed reputations, will go to the Court of Appeal today in a bid to overturn the High Court ruling that unauthorised overdraft charges are unlawful.

The banks lodging the appeal include; Abbey, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, Nationwide and the Royal Bank of Scotland.

Whatever the outcome, not expected to be decided for quite some time, the banks will ensure that they make money out of their customers one way or another. In the event they lose the appeal, they will simply abolish free current accounts.

It's as simple as that!