Lloyds Bank and five of its former directors “emphatically reject” allegations they were bullied into taking over HBOS, their QC has told the high court.
Helen Davies was responding to claims made by 6,000 Lloyds shareholders, who have brought a £600m compensation claim that they were not given a true picture of the financial health of HBOS when they voted through the takeover in November 2008.
When the case opened on Wednesday, the shareholders’ QC, Richard Hill, said Lloyds had been bullied into taking over HBOS by being told it would need a £7bn government bailout in October 2008 if it continued as a standalone bank.
Lloyds announced the takeover of HBOS on 18 September 2008. The government eventually took a 43% stake in the enlarged Lloyds Banking Group, but it no longer owns any shares after selling its final tranche in May.
Davies said the directors, who include former chairman Sir Victor Blank and former chief executive Eric Daniels, emphatically rejected the idea that the demand by regulators that it find £7bn of capital was a “naked threat”.
Blanks and Daniels are scheduled to give evidence in the coming weeks along with three other former directors named in the case: former finance director Tim Tookey, ex-head of retail Helen Weir and former head of wholesale banking Truett Tate.
Hill told Mr Justice Norris at the start of the case on Wednesday that the the deal took place amid intervention from the then prime minister, Gordon Brown, to avoid the nationalisation of HBOS in September 2008.
The shareholders, Hill said, were “mugged” during the transaction and were not told about loans HBOS was receiving from the Bank of England and Lloyds itself.
Davies said Lloyds had found that the requirement for an extra £7bn of capital was not negotiable with the Financial Services Authority, the then City regulator.
This was set out during the weekend in October 2008 when the UK was orchestrating a so-called recapitalisation exercise of its banking sector. The City regulator, she said, had wanted to “bulletproof” the banking sector and had rejected Lloyds’ calculations that £3bn of capital would be required.
She said it was the responsibility of investment banking advisers at Merrill Lynch, UBS and Citibank to ensure that information sent to Lloyds shareholders was correct. During this transaction, she said, UBS had the primary responsibility for dealing with the UK Listing Authority, which oversees stock market-listed companies and analysed the information. “This is not just a box-ticking exercise,” Davies said.
This article was written by Jill Treanor, for theguardian.com on Friday 20th October 2017 16.29 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010