Report claims Britain’s Lloyds misled investors over HBOS fraud

A branch of Lloyd's bank in the City of London financial district. (Reuters)
Updated 19 June 2018
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Report claims Britain’s Lloyds misled investors over HBOS fraud

  • Report alleges HBOS knew of fraud as early as 2004
  • Lawmakers had urged publication of confidential report

LONDON: An internal Lloyds Banking Group report written by a former manager at the bank and published on Tuesday alleges serious misconduct by the lender over the handling and disclosure of a fraud at its HBOS Reading unit.

The report, written in 2013 after the Lloyds manager had taken her concerns to the police, alleges HBOS executives knew of the fraud as early as 2004 and failed to properly disclose it, with far-reaching implications given Lloyds’ takeover of HBOS in 2009.

It also states Lloyds mishandled its investigation and disclosure of the fraud following that takeover.

“This report was provided to the FCA and the police at the time, in 2014, “a spokesman for Lloyds said, referring to the regulator, the Financial Conduct Authority (FCA).

The former Lloyds manager began looking into the bank’s handling of the fraud case on her own initiative, and was then asked to write the report when she alerted the bank’s Audit department, the Lloyds spokesman said.

Lloyds did not in its statement address the substance of the report’s allegations that it misled investors over its financial health by not disclosing the fraud earlier.

Lawmakers last week urged Lloyds to publish the report, which the bank had declined to do on the grounds it contained sensitive information about its customers.

Scottish businessman Neil Mitchell, a frequent critic of Britain’s big banks, published the report online on Tuesday, saying it was in the public interest.

The report has circulated privately among regulators and law enforcement officials for years but has not been made available to the public.

Six people including two former HBOS bankers were jailed last year for a combined 47 years for their role in the fraud, in which the conspirators enriched themselves at the expense of the bank’s business clients.

The report says that if HBOS had properly disclosed the fraud in its 2007 annual report, the £4 billion ($5.3 billion) 2008 rights issue that stabilized its precarious financial position, and its subsequent takeover by Lloyds, would not have happened.

Its publication comes at a sensitive time for Lloyds as it attempts to move past a painful legacy of missteps before and during the financial crisis.
That process has been complicated by ongoing scrutiny of the bank’s handling of the HBOS fraud.

Britain’s financial watchdog is conducting a probe into HBOS and what its executives knew of the fraud, while a retired judge is probing whether Lloyds then properly investigated the incident after it bought HBOS in 2009.

That report will likely not be published until late next year at the earliest, Reuters reported in May.

Britain’s National Crime Agency has also widened a review into the fraud at HBOS to look into allegations that fell outside of the initial criminal investigation.


Bahrain to use Huawei in 5G rollout despite US warnings

Updated 35 min 27 sec ago
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Bahrain to use Huawei in 5G rollout despite US warnings

  • Washington has warned countries against using Chinese technology
  • ‘We have no concern at this stage as long as this technology is meeting our standards’

DUBAI: Bahrain plans to roll out a commercial 5G mobile network by June, partly using Huawei technology despite the United States’ concerns the Chinese telecom giant’s equipment could be used for spying.
Washington has warned countries against using Chinese technology, saying Huawei could be used by Beijing to spy on the West. China and Huawei have strongly rejected the allegations.
VIVA Bahrain, a subsidiary of Saudi Arabian state-controlled telecoms firm STC, last month signed an agreement to use Huawei products in its 5G network, one of several Gulf telecoms companies working with the Chinese company.
“We have no concern at this stage as long as this technology is meeting our standards,” Bahrain’s Telecommunications Minister Kamal bin Ahmed Mohammed told Reuters on Tuesday when asked about US concerns over Huawei technology.
A senior State Department official said the US routinely urges allies and partners to consider the risks posed by vendors subject to extrajudicial or unchecked compulsion by foreign states.
The US Fifth Fleet uses its base in Bahrain, a Western-allied island state off the Saudi coast, to patrol several important shipping lanes, including near Iran.
Bahrain expects to be one of the first countries to make 5G available nationwide, Mohammed said, although he cautioned it would depend on handset and equipment availability.
Early movers like the United States, China, Japan and South Korea are just starting to roll out their 5G networks, but other regions, such as Europe, are still years away and the first 5G phones are only likely to be released in the second half of this year.
Bahrain’s state-controlled operator Batelco is working with Sweden’s Ericsson on its 5G network, while the country’s third telecoms group Zain Bahrain is yet to announce a technology provider.
No foreign company is restricted by the government from providing equipment for Bahrain’s 5G network, Mohammed said, adding mobile operators choose who they work with.
Australia and New Zealand have stopped operators using Huawei equipment in their networks but the European Union is expected to ignore US calls to ban the Chinese company, instead urging countries to share more data to tackle cybersecurity risks related to 5G networks.
Mohammed said the rollout of the 5G network was an “important milestone” for Bahrain, which is hoping investments in technology will help spur its economy, which was hit hard by a recent drop in oil prices.
“It is something we are proud to have,” he said.