HBOS scam inquiry will look to very top of bank.
The bank has set aside an extra £100 million to compensate victims of the fraud.
A new independent lawyer’s investigation into the handling of the HBOS Reading fraud will go to the very top of Lloyds Banking Group, examining the roles of the three successive chairmen Sir Victor Blank, Sir Win Bischoff and Lord Blackwell.
Lloyds announced the investigation, which also will take in the roles of the former and present chief executives Eric Daniels and António Horta Osório, as it earmarked an extra £100 million to compensate the 70 businesses damaged by the fraud, for which six people were jailed this year.
At the same time, the Financial Conduct Authority said that it had reopened its investigation into whether there was a cover-up of the scandal at HBOS before its takeover by Lloyds TSB in 2009. An earlier inquiry launched in 2010 was put on hold at the request of Thames Valley Police.
The FCA inquiry will examine who knew what about the nature of the scam at HBOS and whether it was properly communicated to regulators after the discovery of misconduct.
The Lloyds investigation, to be conducted by an independent retired judge or QC to be chosen by Lloyds but yet to be named, will examine the conduct of Lloyds executives and directors after January 2009 and whether they properly investigated the matter and kept the regulator informed all the way up to the convictions in February.
Interested parties questioned whether the inquiry could be truly independent. Heather Buchanan, director of policy at the all-party parliamentary group on fair business banking, said that she wanted reassurance on who was being appointed and their right to publish the full, unexpurgated findings.
Nikki Turner, a victim of the fraud, said that victims needed to be consulted on the identity of the inquiry chief, pointing out that they had not been before the appointment of Russel Griggs, who is conducting a separate review of their individual cases.
Lloyds, which has already written off at least £250 million of loans to the corporate targets of the fraud, said that the additional £100 million was to provide interim payments to assist victims in financial difficulty, to cover their reasonable fees for professional advice and to write off any remaining business or personal debts. It promised compensation for economic losses, distress and inconvenience.
Six people including two HBOS bankers were jailed for between and three and a half years and 15 years for counts ranging from bribery and fraud to money laundering. They forced businesses to use a corrupt consultancy and then seized control of them using threats and extortion. Judge Martin Beddoe said when sentencing Lynden Scourfield, one of the HBOS bankers, that he had “sold his soul . . . for sex, for luxury trips with and without your wife, for bling and for swank”.
Separately, the FCA continues to investigate several former HBOS executives to determine whether any should receive a formal City ban.
Source: The Times