|Industry||Finance and Insurance|
|Fate||Acquired by Lloyds Banking Group|
|Key people||James Crosby & Andy Hornby (former Chief Executives)
Lord Stevenson of Coddenham (Chairman)
|Parent||Lloyds Banking Group|
|Subsidiaries||Bank of Scotland plc, HBOS Australia, HBOS Insurance & Investment Group|
HBOS plc is a banking and insurance company in the United Kingdom, a wholly owned subsidiary of the Lloyds Banking Group having been taken over in January 2009. It is the holding company for Bank of Scotland plc, which operates the Bank of Scotland and Halifax brands in the UK, as well as HBOS Australia and HBOS Insurance & Investment Group Limited, the group's insurance division.
HBOS was formed by the 2001 merger of Halifax plc and the Governor and Company of the Bank of Scotland, and the formation of HBOS was heralded as creating a fifth force in British banking as it created a company of comparable size and stature to the established Big Four UK retail banks. It is also the UK’s largest mortgage lender.HBOS Group Reorganisation Act 2006 saw the transfer of Halifax plc to the Governor and Company of the Bank of Scotland, which was now a registered public limited company, Bank of Scotland plc.
Although officially HBOS is not an abbreviation of any specific words, it is widely presumed to stand for Halifax Bank of Scotland. The corporate headquarters of the group were located on The Mound in Edinburgh, Scotland; the former head office of Bank of Scotland. Operational headquarters were based in Halifax, West Yorkshire, England; the former head office of Halifax.
The group became part of Lloyds Banking Group through a takeover by Lloyds TSB. This came into effect on Monday 19 January 2009 after both sets of shareholders approved the deal. HBOS continues to operate as a separate organisation within the new group, although over time it is likely to be restructured.
HBOS Group Reorganisation Act 2006
In 2006, HBOS secured the passing of the HBOS Group Reorganisation Act 2006, a private Act of Parliament that rationalised the bank's corporate structure. The act allowed HBOS to make the Governor and Company of the Bank of Scotland a public limited company, Bank of Scotland plc, which became the principal banking subsidiary of HBOS. Halifax plc transferred its undertakings to Bank of Scotland plc, and although the brand name was retained, Halifax then began to operate under the latter's UK banking licence.
The provisions in the Act were implemented on 17 September 2007.
The share price peaked at over 1150p in February 2007.
2008 short selling and credit crunch
In March 2008, HBOS shares fell 17 percent amid false rumours that it had asked the Bank of England for emergency funding. The Financial Services Authority conducted an investigation as to whether short selling had any links with the rumours. It concluded that there was no deliberate attempt to drive the share price down.
On 17 September 2008, very shortly after the demise of Lehman Brothers, HBOS's share price suffered wild fluctuations between 88p and 220p per share, despite the FSA's assurances as to its liquidity and exposure to the wider credit crunch.
However, later that day, the BBC reported that HBOS was in advanced takeover talks with Lloyds TSB to create a "superbank" with 38 million customers. This was later confirmed by HBOS. The BBC suggested that shareholders would be offered up to £3.00 per share, causing the share price to rise, but later retracted that comment. Later that day, the price was set at 0.83 Lloyds shares for each HBOS share, equivalent to 232p per share, which is less than the 275p price at which HBOS raised funds earlier in 2008.
Acquisition by Lloyds TSB
- Three Quarters of HBOS shareholders voted in agreement with the board's actions;
- Half Of Lloyds TSB shareholder voted to approve the takeover;
- UK government dispensation with respect to competition law.
A group of Scottish businessmen challenged the right of the UK government to approve the deal by overruling UK competition law, but this was rejected. The takeover was approved by HBOS shareholders on 12 December.
Prime Minister Gordon Brown personally brokered the deal with Lloyds TSB. An official[who?] said: “It is not the role of a Prime Minister to tell a City institution what to do”. The Lloyds TSB board have stated that merchant banks Merrill Lynch and Morgan Stanley were amongst the advisers recommending the takeover.
Lloyds Banking Group has said Edinburgh-based HBOS, which it absorbed in January, made a pre-tax loss of £10.8bn in 2008. Andy Hornby, the former chief executive of HBOS and Lord Stevenson of Coddenham, its former chairman, have already come before the Commons treasury committee to answer for the near-collapse of the bank. Mr Hornby said: "I'm very sorry what happened at HBOS. It has affected shareholders, many of whom are colleagues, it's affected the communities in which we live and serve, it's clearly affected taxpayers, and we are extremely sorry for the turn of events that has brought it about."
On 13 October 2008, Gordon Brown's announcement that government must be a "rock of stability," resulted to an "unprecedented but essential" government action: the Treasury would infuse £37 billion ($64 billion, €47 billion) of new capital-bailout into Royal Bank of Scotland Group Plc, Lloyds TSB and HBOS Plc, to avert financial sector collapse or UK "banking meltdown". He stressed, however, that it was not "standard public ownership" for the banks would return to private investors "at the right time."Alistair Darling stated UK taxpayers would benefit from the government's rescue plan, for it will have some control in RBS in exchange of about £20 billion from the taxpayer. Total ownership in RBS would be 60%, with the figure for HBOS 40%. Royal Bank of Scotland stated it intended to raise 20 billion pounds ($34 billion) capital with government's aid, amid its chief executive Fred Goodwin's resignation. The government acquires $8.6 billion of preference shares and underwriting $25.7 billion of ordinary shares. Thus, it intended to raise 15 billion pounds (18.9 billion euros, 25.8 billion dollars) from investors, to be underwritten by the government. Taxpayers' money will buy 5 billion pounds of shares from RBS, amid Barclays bank raising 6.5 billion pounds only from investors, instead of government help.Reuters reported Britain could inject 40 billion pounds ($69 billion) into the said 3 banks including Barclays.
Links to the arms trade
In December 2008 the British anti-poverty charity War on Want released a report documenting the extent to which HBOS and other UK commercial banks invest in, provide banking services for and make loans to arms companies. The charity writes in its report that HBOS holds shares in the UK arms sector totally £483.4 million, and serves as principal banker for Babcock and Chemring.
During 2003 The Money Programme uncovered systemic mortgage fraud throughout HBOS. The Money Programme found that during the investigation brokers advised the undercover researchers to lie on applications for self-certified mortgages from, among others, The Bank of Scotland, The Mortgage Business and Birmingham Midshires. All three are part of the Halifax Bank of Scotland Group, Britain's biggest mortgage lender. James Crosby, head of HBOS at the time, refused to be interviewed in relation to the exposed mortgage fraud. Further examples of mortgage fraud have come to light, which has seen mortgage brokers take advantage of fast track processing systems, as seen at HBOS, by entering false details, often without the applicants knowledge.
Bank of Wales
In 2002, HBOS dropped the Bank of Wales brand and absorbed the operations into Bank of Scotland Business Banking.
HBOS bad loans
On Friday, 13 February 2009, Lloyds Banking Group revealed losses of £10bn at HBOS, £1.6bn higher than Lloyds had anticipated in November because of deterioration in the housing market and weakening company profits. The share price of Lloyds Banking Group plunged 32% on the London Stock Exchange, carrying other bank shares with it.
In September 2012 Peter Cummings, the head of HBOS corporate banking from 2006 to 2008, was fined £500,000 by the UK financial regulator over his role in the bank's collapse. Cummings was also banned from working in the banking industry by the Financial Services Authority (FSA). The losses in his division exceeded the initial taxpayer bailout for the bank in October 2008.
Reading branch fraud and Operation Hornet
On Sunday 3 October 2010, Lyndon Scourfield, former director of mid-market high-risk at Bank of Scotland Corporate, his wife Jacquie Scourfield, ex-director of Remnant Media Tony Cartwright and ex-NatWest banker David Mills were arrested on suspicion of fraud by the Serious and Organised Crime Agency. The scandal centred around Lyndon Scourfield's use of his position to refer companies to Quayside Corporate Services, owned and operated by David Mills, for "turnaround" services which Quayside was unqualified to provide. Several members of Quayside's staff had criminal records for embezzlement. Customers were allegedly inappropriately pressured to take on excessive debt burdens and to make acquisitions benefiting Quayside.
HBOS conducts all its operations through three main businesses:
- Bank of Scotland plc
- HBOS Australia
- HBOS Insurance & Investment Group Limited
Bank of Scotland plc
Bank of Scotland plc is the banking division of the HBOS group, and operates the following brands:
- Bank of Scotland
- Bank of Scotland Private Banking
- Bank of Scotland Treasury Services
- Birmingham Midshires
- AA Savings
- Halifax Financial Services (Holdings) Ltd
- Halifax Investment Fund Managers Ltd
- Halifax Share Dealing Limited
- Halifax Unit Trust Management Ltd
- Intelligent Finance
- Sainsbury's Bank (50%)
- The Mortgage Business (TMB)
- Blair, Oliver & Scott (Debt recovery)
- St James's Place Bank
- Banco Halifax Hispania
- Bank of Scotland Corporate
- Bank of Scotland International
- Bank of Scotland Investment Services
- Bank of Scotland (Ireland), trading as Halifax
- Bank of Scotland (Netherlands)
HBOS Australia was formed in 2004 to consolidate the group’s holdings in Australia. It consists of the following subsidiaries:
- Capital Finance Australia Limited
- BOS International (Australia) Ltd
Reported by Mohsin*
HBOS Insurance & Investment Group Limited
HBOS Insurance & Investment Group Limited manages the group’s insurance and investment brands in the UK and Europe. It consists of the following:
- St James's Place Capital (60%)
- Halifax General Insurance Services Ltd
- St Andrew's Group
- Clerical Medical
- Sainsbury's Bank
- Bachelor, Lisa (4 May 2001). "HBOS: the issue explained". London: Guardian. Retrieved 2008-09-17.
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- "HBOS Group Reorganisation Act 2006". 2006. Retrieved 2008-09-17.
- "Share Price Chart - HBOS PLC (LSE:HBOS)". Retrieved 2010-12-19.
- Treanor, Jill (20 March 2008). "Authorities avert run on HBOS caused by false rumours". The Guardian (London). Retrieved 2008-09-17.
- "FSA concludes HBOS rumours investigation". 2008. Retrieved 2008-09-17.
- "HBOS Statement". 2008. Retrieved 2008-10-11.
- "HBOS in merger talks with Lloyds TSB". BBC News. 17 September 2008. Retrieved 2008-09-17.
- Hoskins, Paul (17 September 2008). "HBOS confirms in takeover talks with Lloyds TSB". Reuters. Retrieved 2008-09-17.
- "Lloyds seals deal for HBOS". Reuters. 18 September 2008. Retrieved 2008-09-18.
- Pratley, Nils (17 September 2008). "Lloyds TSB takeover talks with HBOS: the key issues". London: Guardian. Retrieved 2008-09-17.
- "Salmond attacks financial 'spivs'". BBC News. 17 September 2008. Retrieved 2008-09-17.
- Cable, Vince (22 November 2008). "Brown must not become lenders' Fairy Godmother". London: Daily Mail. Retrieved 2009-03-01.
- Lloyds: What happens next?
- "Lloyds TSB - Your shareholder questions answered". Lloyds TSB. Retrieved 2008-11-03.[dead link]
- Kennedy, Siobhan; Webster, Philip; Seib, Christine (17 September 2008). "Gordon Brown steps in to secure HBOS rescue". London: The Times Online. Retrieved 2008-09-18.
- News.bbc.co.uk, Brown: We'll be rock of stability
- Bloomberg.com, Stocks Rebound After Government Bank Bailout; Lloyds Gains
- Guardian.co.uk, Darling: UK taxpayer will benefit from banks rescue
- Afp.google.com, Britain to invest up to 37 billion pounds in ailing banks
- Reuters, British banks set for 40 billion pound rescue: sources
- War on Want, Banking on Bloodshed
- The Money Programme uncovers massive mortgage fraud
- "Lloyds shares tumble as HBOS slumps to £10bn loss". The Daily Telegraph (London). 13 February 2009. Retrieved 2009-02-28.
- HBOS banker Peter Cummings fined by regulator
- Kossoff, Julian (12 September 2012). "Ex-HBOS Rainmaker Peter Cummings Hit with £500,000 FSA Fine and Life Ban". International Business Times. Retrieved 11 October 2012.
- Former HBOS banker bailed over alleged money-laundering
- Four arrested over money laundering and large-scale fraud at HBOS
- Australia's CBA to buy BankWest for $1.5bn
- "Notification of major interest in shares" (Press release). Phorm Inc. 2 October 2009. Retrieved 2 October 2009.
- "Lloyds sells Insight Investment to Bank of New York Mellon", "The Guardian", London, 12 August 2009. Retrieved on 25 April 2012.
- "Lloyds disposals begin with £235m sale of Insight to BNY Mellon", "The Daily Telegraph", London, 12 August 2009. Retrieved on 25 April 2012.
- "Lloyds sells Insight to Bank of New York Mellon", "The Daily Telegraph", London, 12m August 2009. Retrieved on 25 April 2012.
- Official website of HBOS plc (now redirects to Lloyds Banking Group website)