Libor scandal cited by Lloyds investors in court claim

Wednesday 11th July 2012

Lloyds shareholders who have been campaigning for compensation after they lost money when the bank took over HBoS, have added Libor to their claim.

The Lloyds Action Now (LAN) group say that the Libor scandal is further proof that they were misled into voting, in December 2009, for the takeover of the stricken bank.

LAN has now instructed its lawyers to incorporate this claim into their action, alleging that the Lloyds TSB directors knew that HBoS’s real interest rates were not being quoted at the time that they were recommending the merger.

Sir Andrew Watson, chairman of LAN, said: “On 18th September 2008, HBoS posted figures for Libor that were clearly completely false and misleading.

“We now know that HBoS was not able to borrow from other banks and had to be the recipient of loans of last resort from the Bank of England and the US Federal Reserve in staggering sums.

“Despite this, HBoS pretended that it was able to borrow money from other banks on an unsecured basis at rates more favourable than, for instance, HSBC Bank could.

“Lloyds TSB directors closed their eyes to this, did not disclose the true position and even hid the fact HBoS had received massive secret loans to keep it afloat in the run-up to the takeover.”

The LAN group has almost 9,000 members and is set to claim around £2bn. Its central claim is that the Government did not disclose the extent to which it had been propping HBoS up. After the takeover, share prices in Lloyds plummeted.

A spokesman for Lloyds Banking Group, said: “As with many others in the sector, the Group is assisting various regulators in their ongoing investigations into the setting of the Libor. Until these investigations are completed, it would be inappropriate for us to comment any further.”

She added: “We believe that the disclosures about HBoS’s financial position in the documentation provided to shareholders were appropriate.

“We and HM Treasury have provided detailed responses to LAN explaining why this is the case and the many reasons why LAN’s claims are fundamentally flawed.”

Meanwhile, the Libor scandal has cost former Barclays boss Bob Diamond around £20m.

He is waiving all bonuses and considerations which would normally go to him upon his departure, Barclays chairman Marcus Agius told MPs.

Appearing before MPs at the Treasury Select Committee yesterday, Agius revealed that Diamond has decided to give up about £20m of his departure package.

He will still receive 12 months’ salary, pension contributions and other benefits thought to be worth £2m.