How Lloyds picked our pocket

Lloyds has admitted to ripping off the taxpayer despite the bank having been bailed out with public funds.

Lloyds is being fined £218m as part of a settlement with UK and US authorities. It admitted fiddling the rates used to calculate its fees for accessing the Bank of England's Special Liquidity Scheme (SLS) during the 2008-09 financial crisis.

The SLS was a crucial funding lifeline, allowing the banks to borrow when the interbank market dried up. The rate used to calculate the charge was the repo rate, at which the government buys back government securities from commercial banks.

The cost to the taxpayer was £8m in fees, which the bank has now had to pay back. Mark Carney, the Governor of the Bank of England, condemned Lloyds' behaviour during the crisis as "highly reprehensible" and suggested that criminal charges could follow.

What the commentators said

This is the "most dispiriting" scam so far in the ongoing scandal over banks' benchmark interest rate manipulation. Fiddling rates to reduce the fees Lloyds paid for taxpayer support "was like a bankrupt picking the pocket of a charitable benefactor".

"The sheer outrageousness of this far outstrips the gains to the bank," noted Paul J Davies in The Wall Street Journal. Lloyds' actions reduced the cost of funding by £7.76m. But as Lloyds fiddled an industry-wide benchmark, that saving went to the entire banking industry. All told, Lloyds itself saved less than £4m out of its total fees of £1.28bn.

That's a sad reflection of the deeply ingrained "culture of chicanery" in the sector, said Iain Martin on Telegraph.co.uk. "Ripping off those keeping a roof over your head became natural."

It undermines public confidence that no senior public bankers have been held legally to account for their part in the financial crisis, agreed the FT. It's about time the authorities made an effort.

Recommended

Which assets will benefit as the “jam tomorrow” bubble pops?
Investment strategy

Which assets will benefit as the “jam tomorrow” bubble pops?

With tech stocks, cryptocurrencies and many other “long duration” investments crashing hard, the “jam tomorrow” bubble looks to be bursting. John Step…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Inflation: now we really have something to worry about
Inflation

Inflation: now we really have something to worry about

We’ve been worrying about a sharp rise in inflation for years, says Merryn Somerset Webb – now, we finally have something to worry about.
21 Jan 2022
Share tips of the week – 21 January
Share tips

Share tips of the week – 21 January

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
21 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022