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John Kingman, the man in charge of UK banks, has a few years before his knighthood to show some backbone. A skilled Whitehall infighter, the Treasury golden boy came to this job with the dubious distinction of having been Gordon Brown’s spinmeister when he was chancellor of the exchequer and then the official responsible for £600bn of public spending at a time of chronic fiscal incontinence. He could start making amends by sacking Sir Victor Blank and Eric Daniels. As chief executive of UK Financial Investments, it is his job to tell them they are no longer needed as chairman and chief executive of Lloyds Banking Group.
Their foolhardy decision to acquire Halifax Bank of Scotland has done severe damage to a one-time paragon of conservative banking. Lloyds is tumbling into majority public ownership under their watch, on Thursday announcing that corporate impairments would be more than 50 per cent higher this year than last, worse than predicted in February. Retail impairments will be up “significantly”. Some fear the government might tweak the details of how Lloyds injects £250bn of dud loans into the asset protection scheme, to the disadvantage of private shareholders. The existing £25bn “first loss piece” will be well over half-consumed by the year’s end, Collins Stewart says.
Sir Victor and Mr Daniels must pay for their recklessness. Eager to take advantage of a government waiver of competition rules, they jumped at the chance to secure a dominant position in UK retail banking without taking the elementary precaution of securing the same kind of government backstop for unexpected losses that JPMorgan insisted on in buying Bear Stearns. They have blown up their own bank. They are now blowing up HM Treasury. There is no explanation as to why they are still there except for the obvious one: the government does not want to draw even more attention to its own role in Lloyds’ implosion.
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