Everyone JUST missed this embarrassing UK Treasury screw up related to Lloyds
GettyEveryone concentrated so hard on Lloyds Banking Group's 2014 results announcement today that they missed one of the most embarrassing blunders made by Britain's Treasury this year.
In a regulatory statement, the UK Treasury admitted that fat fingers were to blame for it telling Lloyds that the Prudential Regulatory Authority had allowed it to buy back bonds - Enhanced Capital Notes - that helped keep it afloat during the credit crisis.
Sir Nicholas Macpherson, Permanent Secretary, HM Treasury revealed in a regulatory statement that the government made a huge blunder regarding the correspondence on Lloyds' ECNs:
"Due to a clerical error at HM Treasury, incorrect information regarding ongoing regulatory decisions by the Prudential Regulation Authority (PRA) has been included in correspondence to certain individuals and sent out under electronic signature."
"This information is in relation to Lloyds Banking Group's application to the PRA for permission to redeem certain series of its Enhanced Capital Notes (ECNs), as disclosed by Lloyds Banking Group on the 16th December 2014."
"HM Treasury incorrectly informed those it wrote to that the PRA had approved Lloyds' application to call the relevant series of notes. HM Treasury understands that the PRA has not yet made a decision regarding whether to approve Lloyds Banking Group's application. We apologise for this error, and sincerely regret any problems caused."
Lloyds received £20.5 billion in state handouts between 2008 and 2009 following the credit crisis. In a bid to stop going to the government for more cash, it issued ECNs, which are also known as CoCos (Contingent Convertibles).
The bond pays investors a mandatory coupon. However, the ECN would immediately convert into ordinary shares if the bank's Core Tier 1 capital (the capital adequacy of tha bank that includes equity capital and disclosed reserves) ratio fell below 5%.
In December 2014, Lloyds announced that it wanted to buy back or exchange a bulk of ECNs for up to £8.4 billion.
Clearly, someone was a little too eager in saying 'yes' to Lloyds.