It’s right there — on page 114 — in case you missed it. The full prospectus for Lloyds Banking Group’s heroic capital raising, finally confirms the following:
FSA supervisory review into historical HBOS disclosures
The FSA is conducting a supervisory review into the accuracy and completeness of financial disclosures made by HBOS in connection with its capital raisings in 2008, including information as to corporate impairments disclosed in the circulars and/or prospectuses issued by HBOS in
connection with such capital raisings. The Group is cooperating fully with this review.
This will be belated good news to one John Hunter, a former company secretary at Bank of Scotland before it merged with Halifax. He went to both the Treasury and the FSA in November of last year to lodge a formal complaint.
Hunter’s complaint suggested HBOS chief executive Andy Hornby and his chairman Lord Stevenson had been misleadingly upbeat in their assessment of the bank’s health in the months ahead of its rescue-merger with Lloyds.
The toes of Hornby et al must curl when they are reminded of what was said back in the spring and early summer of 2008. Chatter of funding problems in March was absolutely wrong, and even if the bank did soon need a £3.8bn rights issue, the board was able to declare in June’s cash call circular:
The board is optimistic about the fundamental prospects of the company’s core business…we are well placed to deliver long-term sustainable growth.
And then again in the full prospectus:
The company is of the opinion that, taking into account the net proceeds of the rights issue, the working capital of the group is sufficient for the group’s present requirements, that is for at least the 12 months from the date of this prospectus.
But there is a sense with HBOS and its bungled rescue that the real issues that need investigating go some way beyond bad boardroom communication. After all, this was seen at the time as egregious corporate guff; the bank was in denial, and the market knew it.
Blogger Ian Fraser has been on the HBOS case pretty much full time ever since. His comprehensive report on the matter published back in January is well worth a read, as is a valedictory take on the affair published in this weekend’s Independent on Sunday.
Fraser has also written extensively about goings on in the HBOS corporate lending department. Given the hair-raising nature of so many stories surround HBOS, it is difficult to understand why it is only now that we have confirmation of some sort of regulatory enquiry.
A suspicion remains that this is one financial probe that needs to go a lot deeper.
According to Bloomberg, FSA spokeswoman Kirsty Clay declined to comment on any investigation it may be carrying out; Harry Hussain, a spokeswoman for Lloyds, declined to comment further; Fiona MacRae, a spokeswoman for RBS, declined to comment beyond what was in the report.
We expect there will be some kind of comment — from both the FSA and from HBOS — soon enough.
