Former HBOS chairman Lord Dennis Stevenson told the FSA it was a “safe harbour” in March 2008, just six months before it nearly collapsed.
In a letter to FSA chairman Sir Callum McCarthy in March 2008, published today by the Parliamentary Commission on Banking Standards, Stevenson said HBOS was “robust” and will be “boringly boring” for the next year or two.
In October 2008, Lloyds bought HBOS before the merged firm, Lloyds Banking Group was bailed out by the Government to the tune of £21bn.
In his letter Stevenson told the FSA HBOS was a “highly conservative” institution with “high quality” assets, and claimed the bank had no problem financing itself, even on the “hairiest of days and weeks”.
He wrote: “My soberly considered view is that given the extraordinary external environment, HBOS in an admittedly uncertain and worrying world is in as secure a position as it could be. Happy to be cross questioned on this but I hope you know me well enough to know this neither bravura nor an ill considered statement.
“The new 24/7 problem of rumour feeding upon rumour and creating a wholly irrational ‘hit’ or ‘run’ on an institution – probably but not necessarily generated with criminal intent – that create self fulfilling prophecies that are difficult to stem. That is my number one worry.”