Mar 18

A new row erupted over the pension for Sir Fred Goodwin today when MPs were told the former Royal Bank of Scotland chief executive had taken a £3m lump sum from his £16.9m pension pot – and the bank had paid 40% tax on the payment.

The City minister, Lord Myners, told the Treasury select committee that the board of RBS was “in denial” and had “bent over backwards” to be generous to Goodwin, its departing chief executive, last October when the bank was on the brink of collapse.

Myners revealed that Goodwin had agreed to repay the lump sum, provided his pension entitlement was increased.

It later emerged that the exact sum withdrawn was £2.7m, at a cost to RBS of £4.5m when the tax payment is taken into account, and that Goodwin had not yet returned the sum because there was no agreement with the Revenue that he would not be liable for tax.

Related article: Ministers ‘to sue’ RBS directors over Sir Fred Goodwin’s pension (Telegraph)

Myners, who was accused by MPs of being “bloody naive”, revealed more details of Goodwin’s “extraordinary” pension agreements. The bank treated Goodwin as though he had joined the pension scheme at the age of 20, rather than at 40 when he actually joined. None of his pension savings from previous employers were included in the scheme and 50-year-old Goodwin was allowed to choose his 12-month earnings figure from the best year in the previous decade.

Documents released by the committee show that Peter Cummings, the HBOS executive who ran the division which caused record-breaking losses at the bank, has also been allowed to retire immediately even though he is only 53. He is receiving £352,000 a year after HBOS, now part of Lloyds Banking Group, treated departing executives as if they were made “redundant”.

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Mar 12

March 11 (Bloomberg) — Paulson & Co., the hedge fund run by billionaire John Paulson, may have made 311 million pounds ($428 million) since September by short selling Lloyds Banking Group Plc and HBOS Plc.

The firm took short positions in London-based Lloyds and HBOS that were valued at 367 million pounds in September, based on the holdings and share prices on the dates they were reported. The stake fell below the reporting threshold on March 9, regulatory filings show.

Paulson, which made $3 billion anticipating the U.S. housing market would collapse, gained as Lloyds, HBOS and Royal Bank of Scotland Group Plc sought bailouts from British taxpayers. Lloyds surrendered control to the government on March 7 in exchange for asset guarantees. Paulson made least 295 million pounds shorting RBS, bringing its profit from betting U.K. banking stocks would drop to 606 million pounds, according to earlier disclosures.

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Feb 26

Gordon Brown helped fuel Britain’s banking crisis by pressuring the City regulator not to intervene and stop reckless lending, Lord Turner, the head of the Financial Services Authority, said.


Chairman of the FSA Lord Turner Photo: JULIAN SIMMONDS

The authority’s chairman claimed the regulator was under political “pressure” not to be “heavy and intrusive” with banks such as HBOS and Northern Rock.

Instead, it was told to operate a “light touch” approach, which had now been proved to be “mistaken”, he told a Commons committee.

The failure of the regulator to intervene earlier has been blamed for the banking crisis, which has led to the near-collapse of several of the country’s biggest banks.

Lord Turner’s remarks, made to MPs, are deeply embarrassing for the Prime Minister, who oversaw the FSA while he was Chancellor.

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Feb 18


Resigned: Sir James Crosby quit as deputy chairman of the FSA after claims that he sacked a whistleblower who warned the bank was expanding too fast.

The senior banker blamed for the crisis at HBOS came under fresh attack today as it emerged that he is in line for a ‘scandalous’ pension of more than half a million pounds a year.

Sir James Crosby, who was forced to quit as a City regulator last week, is due to get an annual income of £572,000 after building up a pension pot of £10.4m. The Liberal Democrats today urged Sir James to forgo the payout, given the crisis the bank now faces.

The proposed pay-out will cause further embarrassment to the newly created Lloyds Banking Group, which took over HBOS this year.

Taxpayers currently own 43% of Lloyds and HBOS and Chancellor Alistair Darling is expected by many to further nationalise the bank amid plunging share prices. The bumper pension, the details of which are buried in HBOS’s annual report published last week, heaps further pressure on to Sir James.

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Feb 14

Last night on BBC’s Newsnight Alistair Darling, the Chancellor, defended both the Government’s role in pushing through the Lloyds takeover of HBOS last October without due diligence and the subsequent £17 billion taxpayer-funded bailout of the merged entity.

“The problem was that last October the banking system was facing imminent collapse,” he said. “We had no alternative but to intervene quickly.We had a matter of days and then hours to stop the entire banking system collapsing. Since then many other countries have done the same thing. The alternative was to let HBOS go down and last October [at such a critical point] the damage would not have stopped there.”



Peter Cummings, left, at a dinner with the Top Shop owner Sir Philip Green in 2007. Mr Cummings was the head of corporate lending at HBOS and the bank’s highest-paid director (Jeremy Young)

HBOS’s aggressive corporate banking division was revealed to have been at the heart of the £10 billion shock loss announced by Lloyds Banking Group yesterday.

Lloyds Banking Group issued a warning that HBOS, the ailing bank it has taken over, made a whopping £7 billion of corporate losses last year after making bad bets on business lending.

Lloyds admitted that HBOS’s corporate division, which was run by Peter Cummings – the highest-paid executive at the bank – has had to write off £7 billion of bad loans, far more than HBOS’s management ever admitted. Mr Cummings is understood to have left in early January with a payoff thought to be about £660,000 and £6 million of pension entitlements.

The announcement leaves taxpayers facing billions of pounds of extra losses on their rescue of Lloyds and HBOS, while politicians are now warning that it is inevitable that the Lloyds Banking Group will need more government money to keep it afloat.

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Feb 14


‘Sales person’: Sir James Crosby ‘focused on growing HBOS

A second HBOS whistleblower today claimed there was “a total disregard to the risk process” at the bank under the leadership of former chief executive Sir James Crosby.

Dr Bijan Khandani, a risk manager at HBOS between 2003 and 2005, told the Evening Standard his efforts to protect it against risk were thwarted by senior staff.

“I encountered a lot of resistance,” he said. “I was amazed by this culture where there was a total disregard to the risk process.”

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Feb 13

Feb. 13 (Bloomberg) — Paulson & Co., the hedge fund run by billionaire John Paulson, may have made as much as $67 million in 25 minutes today as Lloyds Banking Group Plc lost about 5.9 billion pounds ($8.5 billion) in market value.

Related article: Lloyds hit by £10bn HBOS losses (Financial Times)

Lloyds fell the most in 20 years after saying HBOS Plc, the U.K. lender it took over last month, would report a 10 billion- pound pretax loss. The shares plunged as much as 43 percent in less than 25 minutes of London trading.

Paulson, who made billions from betting against the subprime mortgage market, held a Lloyds short position representing 0.79 percent of the bank, or 129.3 million shares, as of Jan. 20, according to a regulatory filing. DataExplorers.com, which tracks share borrowing from London, said 1.1 percent of the stock was on loan as of Feb. 11, the most recent data available. That’s down from as much as 8 percent six months ago and suggests Paulson held the bulk of the remaining short position.

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Feb 10

HBOS sacked and gagged a senior executive who four years ago warned the board of the bank that they were taking excessive risks, according to evidence given in Parliament this morning.

MPs on the Treasury Select Committee were given details of a submission from the former head of risk at HBOS who claimed that he warned the board repeatedly that they were taking risks with financial stability and consumer protection.

Full text: whistleblower statement

Paul Moore, a former partner of KMPG and head of group regulatory risk at HBOS between 2002 and 2005, accused the bank of “a total failure of all key aspects of corporate governance” and said that he was repeatedly rebuffed and thwarted when he tried to register concern.

In a highly sensitive development he also pointed the finger of blame firmly at Sir James Crosby, the former chief executive of HBOS, who is deputy chairman of the chief City regulator the Financial Services Authority and a senior adviser to the Government.

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Feb 07

Disgraced banking boardroom executives at HBOS walked away with cash payments worth hundreds of thousands of pounds each, the Guardian has learned.

Executives were handed the cash after HBOS was rescued by Lloyds TSB and the takeover formally activated a “change of control” clause in their contracts.

The decision to hand over the cash will fuel a mounting row over the pay of bankers in institutions being bailed out with taxpayer funds. There is growing speculation in Westminster that the government will be forced to follow Barack Obama in the US and impose pay restrictions on bank executives who have sought bailouts.

It comes as millions of pounds of bonuses are about to be paid to employees who remain at Royal Bank of Scotland. The cash payments at HBOS were made at the discretion of the bank, which has received £11bn of taxpayer funds and been folded into the Lloyds Banking Group.

The bank is understood to have allowed share-based performance schemes to pay out in cash rather than shares. Such schemes might more ordinarily roll into the shares of the new company.

The directors are thought to have received 10% of the value of the shares at the time they were granted, rather than their current value. Some of the shares were granted at £11 but were valued at less than 70p when the rescue takeover went through.

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Dec 13

HBOS sent another wave of panic through the banking industry today after revealing that its bad debts will top £8bn this year, wiping out more than half the £15.5bn of emergency capital raised by the lender so far.

Shares across the sector tumbled, with HBOS crashing 20pc and Lloyds TSB 17pc as HBOS investors gathered in Birmingham and voted on its merger with Lloyds TSB. Preliminary indications show they voted overwhelmingly in favour.

Royal Bank of Scotland was off 17pc and Barclays 13pc by early afternoon, while analysts at Dresdner Kleinwort said “more capital increases [are] virtually inevitable” on top of the £50bn being injected into Britain’s eight largest banks.

HBOS revealed that bad debts on mortgages, credit cards and corporate lending – plus writedowns on “toxic” debts – had reached £8bn in the first 11 months of the year. The figure is a £3.2bn increase since September alone.

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Nov 10

Last night an RBS spokesman said: ‘This was an entirely appropriate staff event to recognise outstanding performance by a small number of our staff.’
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The Royal Bank of Scotland has blown £300,000 on a secret champagne junket for executives – less than a month after being given a £20billion handout by the taxpayer.

Bankers and their partners enjoyed the lavish party to mark their ‘success’ after a year in which the collapse of the banking industry led to global financial meltdown.

The supposedly stricken bank laid on the celebration amid extraordinary secrecy to try to prevent details reaching the public, even cancelling the original venue, a top hotel in Hampshire, and transferring the party 350 miles north to Edinburgh.

Dancing in the street: Bankers threw a lavish party to celebrate 'success'
Dancing in the street: Bankers threw a lavish party to celebrate ‘success’

But despite holding the black-tie ball in private, executives gave the game away as they danced in the street and continued the fun back at their five-star hotel.

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Nov 07

Alistair Darling summoned the chief executives of Britain’s biggest banks to Downing Street today to demand that they immediately pass on the Bank of England’s interest rate cut to their customers.

Treasury sources confirmed to The Times that the Chancellor told the heads of all Britain’s big high street lenders – including HSBC, Barclays, Lloyds TSB, HBOS Nationwide and Abbey – to implement rate cuts immediately.

Yesterday, the Bank of England slashed interest rates by 1.5 per cent to 3 per cent, the lowest level in 54 years, and today, the shock reduction helped to ease the strain in nervous money markets.

Libor, which is the rate at which banks lend to each other and is key for pricing mortgages, fell by more than one per cent from 5.561 per cent to 4.496 per cent.

However, the figure remains almost 1.5 per cent higher than the official interest rate.

The spread between the Bank of England’s borrowing cost and the rate that banks charge to borrow money over a three-month period – a key measure in the wholesale money market – is the widest since October 22. The day before, Mervyn King, the Governor of the Bank of England, publicly acknowledged for the first time that a recession in the UK is now likely.

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Oct 13

Oct. 13 (Bloomberg) — France, Germany, Spain, the Netherlands and Austria committed 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in lenders, racing to prevent the collapse of the financial system.

The announcements came as Britain took majority stakes today in Royal Bank of Scotland Group Plc and HBOS Plc. The coordinated steps followed a pledge yesterday by European leaders to bolster market confidence as the global economy slides toward recession.

“What it should do is stabilize the banking system,” said Peter Hahn, a fellow at London’s Cass Business School and former managing director at Citigroup Inc. “Will it stop us from having a recession? No, nothing is going to stop us from having a recession.”

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Oct 12

Government set to become biggest shareholder in top banks as Japanese weigh bid for Morgan Stanley

THE government will launch the biggest rescue of Britain’s high-street banks tomorrow when the UK’s four biggest institutions ask for a £35 billion financial lifeline.

The unprecedented move will make the government the biggest shareholder in at least two banks.

Royal Bank of Scotland (RBS), which has seen its market value fall to below £12 billion, is to ask ministers to underwrite a £15 billion cash call.

Halifax Bank of Scotland (HBOS), Britain’s biggest provider of mortgages, is seeking up to £10 billion.

Lloyds TSB, which is in the process of acquiring HBOS in a rescue merger, wants £7 billion, while Barclays needs £3 billion.

The scale of the fundraising could lead to trading at the London stock market being suspended. This would give time for the market to digest the impact of the moves.

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Oct 07

Shares in Britain’s banks plunged again amid panicky trading following emergency talks with the government over a possible injection of billions of pounds of taxpayers’ money into the banking sector.

Royal Bank of Scotland nosedived by almost 40% to 90p in morning trading – its lowest point since the recession of the early 1990s. Barclays, Lloyds TSB and HBOS were also hit, as the lack of a coordinated rescue plan for the banking sector alarmed the City.

By 3pm RBS shares were 32.5% lower at 112p, giving it a market capitalisation of £15.98bn – down from over £75bn a year ago.

HBOS was 23% lower at 124p and Lloyds TSB had lost 13% to 225p. Barclays had recovered most of its early losses following Varley’s comments this morning.

Last night Britain’s bank bosses met with chancellor Alistair Darling, to discuss a possible £50bn injection of equity. They are due to meet again at the Treasury this afternoon.

The talks centre on the idea of a part-nationalisation of the banking system through the injection of capital into the banks via preference shares, which take precedence over ordinary shares during a liquidation, but do not give the holders any voting rights.

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Sep 21


Speculators made a £190million profit from HBoS shares after details of takeover talks with Lloyds TSB were announced on the BBC

City watchdogs are expected to investigate how speculators made a £190million profit from HBOS shares in a frenzied two minutes of trading immediately before news of the bank’s rescue was made public.

Details of the takeover talks between the bank and Lloyds TSB were controversially announced by the BBC’s business editor Robert Peston on Wednesday morning.

Before his 9am broadcast, HBOS shares had dipped to a low of 88p. But his scoop sent the price rocketing to 215p in the space of an hour, giving the mystery buyers huge instant profits.

In just two deals between 8.57pm and 8.58pm, buyers snapped up more than 20million HBOS shares at 96p each, netting millions of pounds in profit.

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Sep 19

In the space of just two momentous weeks, the landscape of global finance has been dramatically transformed. President George W. Bush’s administration has mounted a multi-billion-dollar rescue of the financial system at the cost of inflicting severe damage on the US model of free- market capitalism.

Heavy costs will be inflicted on the American taxpayer, who is now subsidising Wall Street – and indeed financial institutions around the world – in a bail-out of unprecedented size.

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Apr 30

The Bank of England has imposed a permanent news blackout on its £50bn-plus plan to ease the credit crunch.

Ferocious and unprecedented secrecy means taxpayers will never know the names of the banks that have been supported through the special liquidity scheme, which was unveiled by Bank Governor Mervyn King last week.

Requests under the Freedom of Information Act are to be denied. Details will be kept secret even after 30 years – the period after which all but the most sensitive state documents are released.

Any Bank of England employee leaking the names of institutions involved will face court action for breach of contract.

Even a figure for the overall amount advanced will not be published until October. Meanwhile the Bank is expected to issue at least £50bn of Treasury bills to banks in exchange for their mortgages – entirely in secret. Continue reading »

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