FSA probe HBOS information accuracy
Monday November 09 2009
The City watchdog is probing the "accuracy and completeness" of information given to investors by ailing bank HBOS before its rescue by Lloyds TSB last year, it has emerged.
Details of the Financial Services Authority's (FSA) investigation surfaced in documents published alongside Lloyds Banking Group's £21 billion fundraising last week.
The probe centres on the £4 billion rights issue launched by HBOS in April 2008, less than four months before the Lloyds takeover was announced, according to the Independent on Sunday.
The FSA is "conducting a supervisory review into the accuracy and completeness of financial disclosures made by HBOS" which Lloyds is "co-operating fully" with, the documents said.
When the rights issue was launched, the-then HBOS chief executive Andy Hornby said the group was "optimistic about the fundamental prospects for our core businesses", adding that the bank was "well placed to deliver long term sustainable growth".
But HBOS's reckless lending was exposed in the wake of the crisis triggered by the Lehman Brothers collapse in September last year. The Government is now a 43% shareholder in the combined group after pumping in an initial £17 billion.
Just over £2 billion of this has been repaid but the taxpayer will pump in another £5.7 billion under the fundraising plans announced last week.
Shareholders in both banks approved the merger last year but in the prospectus Lloyds said an investigation could lead to a heightened risk of legal action or "public sanction".
The UK Shareholders Association is also considering a possible legal move. Spokesman Roger Lawson said: "We have always said that one of the possible grounds for complaint of the HBOS shareholders was that right issue.
"There were a number of issues at HBOS - particularly their approach to risk management."
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