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From criminal to the comical at HBOS
A great juxtaposition on the front page of the Sunday Times business section at the weekend:
HBOS board to consider rights issue
FSA’s shorting inquiry widens to other banks
Alert readers will remember that HBOS was at the centre of that rumour-furore back in March, when wild chatter of liquidity problems and an overstretched balance sheet at HBOS caused a run on the bank’s shares and runs of a different kind at the Bank of England and the Financial Services Authority.
Now that HBOS has confirmed the existence of liquidity problems by preparing to tap the BoE’s new-fangled SLuSh facility for a cool £9bn and tacitly admitted, in considering a £4bn rights issue, that its balance sheet is overstretched, isn’t it about time the authorities also grew up and admitted they haven’t got any wrong-doing to investigate?
To be clear, the rumours in mid-March centred on the suggestion that HBOS had been forced to go to the Bank seeking emergency assistance - the corollary being that Bank officials had had to cancel travel plans to deal with the crisis. But since an unnamed HBOS spokesman was gaily telling the news wires at the time that HBOS had “an exceptionally strong balance sheet,” asserting now that the rumour-mongers were somehow criminally off-beam back in March is laughable.
According to reports, the FSA’s investigation into the HBOS panic is the most intensive ever undertaken by the regulator, with every bank and broker that traded the shares at the time (one of the most frequently traded stocks in London) ordered to hand over records of related phone and email correspondence.
This is a crass waste of time. The FSA would be better employed enforcing those bits of its fat rulebook that are actually enforceable - such as getting big listed companies, like HBOS, to make timely announcements when price sensitive information (like plans for a £4bn rights issue) leak.
Related links:
HBOS to raise up to £4bn from rights issue - FT story
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Ignoring money being moved from under the bed, all the 7% rates do is shift the ongoing problem from one bank to another. Not sure it bodes well for the credit crunch ending anytime soon.
(Particularly not since 7% is a 2% premium to bank base, which itself will go lower over the year. And “if” any of these banks should fail, there’ll be a heck of a lot of £35k’s to pay out).
I have asked myself the same question re: high rates.
I suppose that if they are getting more from their SVR mortgages then paying 6.74% is still profitable.
Perhaps they are optimistic that once they have acquired depositors they will be able to keep them with lower rates once these deals expire. Not sure that’s a great assumption either.
Finally what kind of rate would they be able to raise 1-year paper at? Forget 1year LIBOR as it’s just a reference rate, I’m not sure they would do better than 6.74%. Look at the rates that US banks have paid (via convertible issues) - 8% !
I hadn’t seen the 7% rate at ICICI….but still a very good rate from a UK name….However I do wonder why they feel the need to offer such high rates to raise deposits from Joe Public.
Grayder - 7% at ICICI now avail!
Bank of Scotland also had an advert for a one year fixed rate bond paying a massive 6.74% (50,000 ) Thes kind of rate are not even available at the likes of ICICI or Kaupthing!
@ Anon :………………only if they took their profits 2 weeks ago ! with HBOS back below £5.00
Timely and truthful statements - cover ups and more cover ups. Didn’t the HBOS boys make a killing on the shares too?
Couldn’t agree more with that last paragraph.