Eric Daniels in the spotlight over Lloyds loans bailout

Published on Wednesday 25 November 2009 20:13

ERIC Daniels, the chief executive of Lloyds Banking Group, faces a grilling today over the bank's receipt of emergency loans as shareholders meet in Birmingham to vote on the bank's planned £13.5 billion cash call – the biggest rights issue in UK corporate history.

The loan details emerged on Tuesday when Bank of England Governor Mervyn King revealed in a Treasury select committee hearing that 61.6bn was lent to HBOS, now part of Lloyds, and Royal Bank of Scotland at the height of the financial crisis last autumn.

While support for RBS peaked at 36.6bn on 17 October, HBOS borrowed 25.4bn on 13 November when then chairman Sir Dennis Stevenson was appealing to the bank's shareholders to back the Lloyds deal. Lloyds investors voted in favour of the takeover on 19 November.

The Banking Act 2009 made it possible for the central bank to keep secret funding assistance in cases where financial stability may be put at risk – introduced in the wake of the run on Northern Rock.

The bank's 13.5bn rights issue is expected to get the green light from institutional shareholders. The government, which owns 43 per cent of the bank, is backing the move.