HBOS facing inquiry into Farepak debacle
The collapse of a Christmas savings company in the UK in October continues to cause difficulties for the Halifax Bank of Scotland (HBOS). British politicians put forward parliamentary motions in mid-November seeking to mount an inquiry into the role of the bank in Farepak's fall into administration.
HBOS had granted an overdraft facility of £40 million for European Home Retail (EHR), the parent company of Farepak, but now stands accused of letting it operate even as it was staring into the abyss, and of trying to make a profit out of its demise.
Farepak was set up in 1969 to help families afford Christmas by setting aside money in a company savings account at any time of the year. Its collapse has left 150,000 people out of pocket, some customers losing up to £2,000 each.
While nothing has yet been proven against HBOS, the reputation of the bank is beginning to suffer. One Labour MP, Jim Devine, says he considered calling for a boycott of HBOS products and services in Scotland until the issue is resolved, but in the end decided to register his protest through other means.
Devine has accused HBOS of operating as the "21st century's unacceptable face of capitalism". The claims against the bank rest on the case set out to Parliament by Devine's fellow Labour MP Frank Field.
Field claims HBOS "allowed Farepak to continue trading while it clawed back something like £1 million a week of people's savings to offset the company's overdraft, gaining £30 million from the disposal of the firm's assets".
Some 90 backbench MPs have signed a Commons motion that urges HBOS to release the £30 million it recovered from the company.
HBOS has flatly denied the allegations and has contributed £2 million to a voluntary fund set up to help Farepak's customers. However, the 150,000 people affected are expected to get back only four pence for every pound they put in.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Capital neutrality key to completing Basel III, says Quarles
Former Republican Fed vice-chair thinks Hill or Bowman could help revive stalled prudential rules
Review of 2024: as markets took a breather, firms switched focus
In the absence of major crises and rules deadlines, financial firms revamped strategy, services and practices
Dora flood pitches banks against vendors
Firms ask vendors for late addendums sometimes unrelated to resiliency, requiring renegotiation
Swiss report fingers Finma on Credit Suisse capital ratio
Parliament says bank would have breached minimum requirements in 2022 without regulatory filter
‘It’s not EU’: Do government bond spreads spell eurozone break-up?
Divergence between EGB yields is in the EU’s make-up; only a shared risk architecture can reunite them
CFTC weighs third-party risk rules for CCPs
Clearing houses could be required to formally identify and monitor critical vendors
Why there is no fence in effective regulatory relationships
A chief risk officer and former bank supervisor says regulators and regulated are on the same side
Snap! Derivatives reports decouple after Emir Refit shake-up
Counterparties find new rules have led to worse data quality, threatening regulators’ oversight of systemic risk