Bank of England ‘threat’ to Lloyds over HBOS loan | Business

Andrew Bailey was the Bank of England’s executive director of banking during the financial crisis in 2008Alex Barrett/BBC

The Bank of England threatened to stop Lloyds using its cheap funding scheme if Lloyds did not make its own loan to stricken rival HBOS, according to court documents.

Andrew Bailey, the Bank’s executive director of banking in 2008, said that Lloyds would only be able to use its Special Liquidity Scheme if it lent HBOS £7.5 billion, the papers filed at the High Court showed.

The scheme was set up to allow banks to maintain liquidity during the financial crisis by swapping high quality loans for Treasury Bills.

Mr Bailey’s position emerged as part of the £600 million legal action brought by almost 6,000 investors in Lloyds over its acquisition of HBOS in 2008.

The group claims that Lloyds’ management did not properly disclose…

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