HBOS fraud: Amid fresh media claims, why it's too early for the curtain to fall on this scandal

Lloyds, HBOS's owner, has dismissed a report in the Sunday Times about its handling of the affair, and says it is focussed on compensating victims

James Moore
Chief Business Commentator
Monday 03 April 2017 12:44
David Mills, centre, and his colleague Michael Bancroft, left, Lynden Scourfield, right
David Mills, centre, and his colleague Michael Bancroft, left, Lynden Scourfield, right

Lloyds was quick to respond to the Sunday Times' report that senior managers attempted to cover up the by now infamous £245m fraud at HBOS that saw ex employee Lynden Scourfield and five others jailed.

“This document was written by an ex-employee,” the bank, which rescued HBOS during the financial crisis, said of the source material. “It is not a police report nor was it requested or sanctioned by the Group. The document contains many unsubstantiated allegations about individuals, auditors, regulators, as well as HBOS, the majority of which are made without any supporting evidence.”

Lloyds went on to note that it shared the document with police in 2014, and included in its statement the usual line about how important it was for the bank to keep schtum until the criminal process was exhausted.

It seemed to do the trick. On a quiet day for the banking sector on the stock market, Lloyds was the leader of the pack when compared with Barclays, RBS, and HSBC.

Its shares were fractionally ahead (theirs all fell) in morning trading, not least because of separate reports about the tax payer's stake in the bank dipping below 2 per cent. The end is in sight for its time as a state backed entity. What’s the small matter of a £245m fraud when set against that monumental achievement?

That might have been the markets’ view, but the public’s view will probably be rather different, and it should be.

Regardless of whether you choose to believe the Sunday Times and its sources, or Lloyds, questions linger over the bank’s handling of the affair.

In its statement Lloyds said its focus is on compensating those affected by the criminals' actions, which led to some businesses going to the wall. It pointed to the review it recently set up to that end.

However, some of the victims of the fraudsters have long criticised Lloyds for dragging its feet and for failing to keep them properly informed.

Thames Valley Police & Crime Commissioner Anthony Stansfield has also expressed his unhappiness over some of the issues raised by the case, and the £7m cost of investigating it borne by householders in his region.

“A fraud of this size could have taken place either displays complicity or incompetence, a lack of corporate governance, complacency, and an absence of proper safeguards,” he said at the successful conclusion. Just so.

It would clearly be in Lloyds’ interest to make this go away. If the review is completed quickly, and the bank opts to be generous to those hurt by the scandal, perhaps it might. And then everyone could focus on what a moneymaking machine it has become with the state (all but) out of the picture.

That’s not good enough. Too many issues were raised by the fraud and its aftermath, during which time the bank was a stated backed entity, for the curtain to be allowed to fall on this affair. Too many questions have yet to be answered.

The inquiry into compensating victims should not be allowed to be seen as the end of the matter. It should be just the start. Would someone kindly pick up the reins?

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