Bankrupt Banker

The cost of Lloyds’ takeover of HBOS

Never have so many jobs been shed by a single bank in British history. It's possible no UK company of any sort has ever reduced job numbers by so much. Because when Lloyds reduces staff numbers by the further 15,000 announced today - scheduled to happen before the end of 2014 - it will have reduced employee numbers by 45,000, compared to where they were at the end of 2008. Some will see those job losses as the biggest cost of the government's decision at the end of 2008 to allow Lloyds to acquire HBOS, to prevent HBOS collapsing and being fully nationalised. That said, Lloyds' new chief executive, Antonio Horta-Orsorio, would argue that the latest 15,000 job reductions are not the elimination of duplicated functions but represent streamlining and simplification that any sensible bank would do. The latest job reductions - some of which will happen through redundancies, though Lloyds hopes to take out as many jobs as possible by natural attrition and redeployment - will mainly affect those employed in middle management and back offices. There's also worrying news for Lloyds' suppliers, since - as part of the new chief executive's plan to take £1.5bn of annual costs out of the bank - it is reducing the number of businesses that provide goods and services to it from 17,000 to less than 10,000. The aim, which would be good news for all of us as taxpayers and owners of 41% of Lloyds, is to return Lloyds to profitability on a sustainable basis. 'Big incentive' And there is a bit of actual good news for taxpayers today in that the amount Lloyds in effect borrows from taxpayers has fallen by £60bn in the last six months. What this means is that Lloyds has repaid everything it owes to the Bank of England under the Special Liquidity Scheme, which was created by the Bank of England during the great crash of 2007-8 to prevent banks like Lloyds from collapsing after assorted securities markets shut down, depriving banks of vital finance. Under Mr Horta-Orsorio's new strategy, Lloyds will become a much more UK-focussed bank - whose recovery will to a large extent be dependent on the UK's economic recovery. Which means that Lloyds will have a big incentive to contribute to that recovery by providing adequate access to credit to small businesses and households that need it. Lloyds is withdrawing from more than half of the 30 countries overseas where it currently operates. And it will attempt to reinvigorate the Halifax brand, to compete with the Lloyds brand. In spite of plenty of speculation to the contrary, Mr Horta Orsoria has decided to keep Scottish Widows, Lloyds insurance business. In fact a central element in his plans to rehabilitate Lloyds is an aim to sell a wider range of products and services to the banks' many millions of customers, with the hope of generating substantial growth in income from retail finance other than just borrowing and lending.

The cost of Lloyds’ takeover of HBOS

Never have so many jobs been shed by a single bank in British history. It's possible no UK company of any sort has ever reduced job numb...

The Los Angeles Dodgers File Bankruptcy

One of the most storied franchises playing America`s pastime has a new chapter, it`s Chapter 11. The Los Angeles Dodgers baseball team is ba...

Police investigating a suspected giant fraud at an office of Bank of Scotland, now owned by Lloyds Banking Group, expect to make more arrests within days.

<a href="http://www.thisismoney.co.uk/money/news/article-2008336/Arrests-expected-Bank-Scotland-fraud-probe.html"> </a>Six people were arrested by Thames Valley Police last year during the investigation into claims that the branch in Reading, Berkshire, stipulated that some of its business clients would have to use an advisory firm to be eligible for fresh funding. However, the fees imposed on the companies by Quayside, a business consultancy, were so large that they crippled several firms, which were then put into administration. Probe: It is alleged Bank of Scotland advisers told businesses to use advisory firm A group of directors who lost their businesses in the affair have written to Lloyds and previously HBOS demanding an investigation. Although the requests have yet to be met, Lloyds confirmed in April that it was talking to lawyers representing the directors, who are now considering bringing legal action against the bank.   Paul and Nikki Turner, directors of music publisher Zenith Cafe, are part of the group of 21 directors. Last week they received a bank statement from Lloyds revealing that Zenith's overdraft had increased from £9,419 in April 2008 to £564,438 in October 2010. The statement showed more than £300,000 of withdrawals, which were paid to law firm Denton Wilde Sapte, now called SNR Denton. Lloyds Banking Group declined to comment on the issue and SNR Denton could not be reached for comment.

Police investigating a suspected giant fraud at an office of Bank of Scotland, now owned by Lloyds Banking Group, expect to make more arrests within days.

Six people were arrested by Thames Valley Police last year during the investigation into claims that the branch in Reading, Berkshire, stipu...

JPMorgan Chase should pay at least $19bn to victims of the Bernard Madoff fraud for allegedly ignoring warnings about round-trip transactions with another financial institution,

JPMorgan Chase should pay at least $19bn to victims of the Bernard Madoff fraud for allegedly ignoring warnings about round-trip transactions with another financial institution, according to a revised lawsuit filed by the bankruptcy trustee. The lawsuit, filed on Friday in New York, triples the $6.4bn in claims previously sought by Irving Picard, the court-appointed trustee for the Madoff fund. It adds new allegations that the bank disregarded warnings from a rival financial institution, which became suspicious after identifying daily circular transactions totalling at least $1m, according to the complaint, which cites testimony from two former bank employees. More The new allegations add to the legal troubles confronting JPMorgan, which faces numerous investigations and private lawsuits stemming from the financial crisis. On Wednesday it paid $153.6m to resolve a Securities and Exchange Commission probe into its sales of a structured mortgage security. The amended complaint alleges that JPMorgan knew about the Madoff fraud going back to the mid-1990s when in 1997 a rival bank discovered round-trip transactions to and from the JPMorgan account. According to the complaint, a Madoff employee would draw down the account at the other financial institution at the end of every business day and then deposit a cheque with the same amount to JPMorgan, which was then Chase Manhattan bank. The size of the cheque ranged from $1m to $10m. The following morning, roughly the same amount would be wired back to the other financial institution giving the appearance during that period that Madoff had twice the money, according to the complaint. The unnamed financial institution became suspicious and closed the Madoff account. Mr Picard alleges that JPMorgan should have observed the same suspicious transactions, according to the complaint. “JPMorgan not only should have known that a fraud was being perpetrated, they did know,” alleged David Sheehan, a lawyer working with Mr Picard. JPMorgan has previously said that it complied with all laws and regulations and no employees were aware of the fraud. In addition to the new allegations, Mr Picard is seeking a jury trial. The filing is the latest in an ongoing legal drama involving roughly 60 lawsuits seeking more than $40bn. Mr Picard has recovered $7.6bn that will be returned to Madoff customers.

JPMorgan Chase should pay at least $19bn to victims of the Bernard Madoff fraud for allegedly ignoring warnings about round-trip transactions with another financial institution,

JPMorgan Chase should pay at least $19bn to victims of the Bernard Madoff fraud for allegedly ignoring warnings about round-trip transaction...

Bank profits distorted by IFRS accounting rules, says Bank of England Governor

In his financial stability report, the Governor of the Bank of England has warned the so-called "incurred loss" system brought in by the International Financial Reporting Standards in 2005, which does not show poor loans until they fail, has led to banks failing to put aside enough of a cash cushion against bad loans. "Inadequate bad debt provisioning can lead to an overly sanguine view of the resilience of the banking sector," the report says. It may also explain why banks are failing to meet the Project Merlin lending targets: "It can also tie up funding in assets generating low returns, potentially impeding the allocation of capital to the real economy." Contradicting a report from the Department of Business last week, the reports adds: "This represents a change from the accounting regime UK banks followed at the time of previous recessions." Sir Mervyn said the rules may be distorting bank results: "Much of the improvement in banks' profits since 2009 has been the result of a fall in provisions made against loans." His conclusions support a campaign – led by City veteran Tim Bush and backed by The Daily Telegraph – that IFRS allows banks to hide the build up of dangerous risks.

Bank profits distorted by IFRS accounting rules, says Bank of England Governor

In his financial stability report, the Governor of the Bank of England has warned the so-called "incurred loss" system brought in ...

Credit default swap insurance taken out by UK banks to hedge their exposure to sovereign debt defaults may prove worthless

Credit default swap insurance taken out by UK banks to hedge their exposure to sovereign debt defaults may prove worthless, financial analysts are warning. The forecast also adds a cautionary note to claims that the UK and US financial systems have a low exposure to the debt crisis engulfing Greece, and comes as Britain's new risk watchdog, the financial policy committee (FPC), increased the pressure on banks to boost capital cushions. Erik Britton, a former Bank of England economist and director of financial market consultancy Fathom, said: "If banks have taken out insurance with a hedge fund, are they comfortable that they will pay out in the event of a default? There is a chance that they have taken cover that is worthless. The banks could be facing a loss [on one side of their investment book] and they won't be able to claim the insurance [on the other side]. Then they may have to recapitalise." The Britton scenario is a worst case, involving a swift default by Greece that pulls Ireland and Portugal into the crisis and then, possibly, Spain and Italy. Most watchers assume that French and German banks are the most vulnerable to a Greek default. However, recent figures published by Fathom suggest that much of the eurozone's exposure has been passed to UK and US banks, which have in turn insured themselves in London and New York with hedge funds. The report states: "Looking across the eurozone periphery as a whole, the total for the US is €193bn and the UK is €74bn. Core European banks' indirect exposure stands at only at €35bn. So the majority of the [insurance] guaranteeing periphery debt appears to have been underwritten by UK and US banks." The comments came as Bank of England governor and FPC chairman Sir Mervyn King said a roadmap was still needed to show markets there was a way out of the Greek debt crisis, and the watchdog's first set of recommendations focused heavily on the risks posed by high-indebted eurozone states. "Sovereign and banking strains are the most material and immediate threat," it said. "Market concerns remain over fiscal positions in a number of euro area countries and the potential for contagion to banking systems." Credit analysts say that hedge funds, which have gambled on default, will be the only winners of a swift default scenario. No default, or a delayed default, will provide investors that have recently bought Greek bonds with profits. Financial institutions typically insure against falling bond prices by taking out a credit default swap (CDS). The difference between a traditional insurance policy and a CDS is that anyone can purchase one, even those who have no direct interest in the loan being repaid. That means speculators, such as hedge funds, can use them to bet on defaults. Credit analysts estimate around €240bn of Greek debt will have to be written off.

Credit default swap insurance taken out by UK banks to hedge their exposure to sovereign debt defaults may prove worthless

Credit default swap insurance taken out by UK banks to hedge their exposure to sovereign debt defaults may prove worthless, financial analys...

Northern Rock, the lender nationalised during the financial crisis after the first run on a British bank in more than a century, is to be sold

The Chancellor said in his Mansion House speech: "Images of the queues outside Northern Rock branches were a symbol of all that went wrong, and its chaotic collapse did great damage to Britain’s international reputation." He said returning the lender to the private sector would help to rebuild that reputation and increase competition on the high street. "We could start to get at least some of our money back," Mr Osborne told the City. "And it would be a very important first step in getting the British taxpayer out of the business of owning banks – and a sign of confidence in the industry." He said an auction was expected to "generate substantially the best value for the taxpayer", but other options to return Northern Rock to the private sector, such as remutualisation or a floatation, have not been ruled out. UKFI, the body that holds the UK taxpayer's stakes in the bailed-out banks, had recommended Northern Rock be sold for at least £1.4bn - which is what the government injected into the bank - rather than remutualised. However, an auction is expected to raise only about £1bn.

Northern Rock, the lender nationalised during the financial crisis after the first run on a British bank in more than a century, is to be sold

The Chancellor said in his Mansion House speech: "Images of the queues outside Northern Rock branches were a symbol of all that went wr...

Surveyor and property developer given sentences of seven and 13 years for their part in a £49m mortgage fraud

Surveyor Ian McGarry and property developer Saghir Afzal were sentenced at Southwark Crown Court yesterday (14 June) to prison terms of seven and 13 years respectively for their part in a £49m mortgage fraud. The sentencing followed an SFO decision to drop a retrial into three accused solicitors, Fatema Patwa, Kamran Malik and Laurence Ferrigan, who the jury could not agree a verdict on. The proescution said a further trial was "not in the public interest". All had pleaded not guilty. Three other defendants, Hardeep Sodhi, Mark Knights and Simon Lawrence, who also pleaded not guilty, were acquitted last month. Investigations undertaken by the Serious Fraud Office into six property transactions found the real combined value of the properties was £6m, prosecuting QC Andrew Ballie said. SFO director Richard Alderman said: "I am pleased with the result, the principal defendants have received hefty sentences, which reflect the seriousness of the offences." The prosecution said that the first count related to a transaction that took place in 2004 on Concentric Works in Priory Road, Aston, secured using a £10.5m mortgage from Cheshire Building Society, the court was told. The second count concerned a former US air force base, Tattersett Business Park in Norfolk. The deal was completed using a £9.1m loan from Societe Generale, based on a fraudulent valuation of £16m by Mr McGarry. The third count related to a property in Alma Street, Smethwick. It was purchased with borrowings of £1.75m from the Bank of Ireland, based on McGarry's valuation. In 2007, it was repossessed by the Bank of Ireland and sold for £100,000. The fourth count related to Saltley Industrial Estate in Birmingham. It was bought in November 2005 for £6m before being sold for £8m using a £6.4m loan from Nationwide. It was repossessed in June 2007 and sold for £650,000. The fifth count involved obtaining £14m from Nationwide to buy St Ivel Works in Carmarthen and the sixth involved the BIP offices, which were sold for £588,000 in January 2006 and, the next month, sold for £7m, using a £6.15m mortgage from Nationwide

Surveyor and property developer given sentences of seven and 13 years for their part in a £49m mortgage fraud

Surveyor Ian McGarry and property developer Saghir Afzal were sentenced at Southwark Crown Court yesterday (14 June) to prison terms of seve...

Part of ex-Credit Suisse broker conviction tossed

A federal appeals court in New York threw out part of the conviction of former Credit Suisse Group AG (CSGN.VX) broker Eric Butler for misleading clients about the safety of auction-rate securities he sold. The 2nd U.S. Circuit Court of Appeals reversed Butler's August 2009 securities fraud conviction by a Brooklyn, New York, jury for selling debt that caused $1.12 billion of investor losses, saying prosecutors brought the case in the wrong court. It upheld Butler's conviction on two conspiracy charges. Butler's case is one of the first criminal prosecutions stemming from the credit crisis that began in 2007. In his appeal, Butler argued that the government should not have brought the case in Brooklyn, which is part of the Eastern District of New York, only because he and co-defendant Julian Tzolov flew from John F. Kennedy International Airport located in the district to meet clients. A three-judge appeals court panel agreed that this reason could not sustain the securities fraud charge. It noted that Butler worked mainly in Credit Suisse's Madison Avenue offices in Manhattan, which is in a different jurisdiction . "We have little difficulty concluding that the government failed to offer competent proof that any act or transaction constituting the securities fraud violation occurred in the Eastern District," Judge Barrington Parker wrote. In contrast, Parker said the conspiracy charges were different because without the "overt act" of traveling through the airport, Butler could not have had face-to-face meetings with investors, "a regular part" of his fraudulent scheme. The panel sent the case back to the district court, where U.S. District Judge Jack Weinstein in January 2010 sentenced Butler to five years in prison and imposed a $5 million fine. Butler has been free on bail, and could face less prison time when he is resentenced. "We're going to review the 2nd Circuit opinion and consider our options," said Robert Nardoza, a spokesman for U.S. Attorney Loretta Lynch in the Eastern District. Steven Molo, a lawyer for Butler, did not immediately return requests for comment. It is unclear how the ruling might affect Lynch's ability to police Wall Street. Her predecessor oversaw the fraud trial of former Bear Stearns Cos hedge fund managers Ralph Cioffi and Matthew Tannin, which ended in acquittals in November 2009. RISKIER DEBT SOLD Prosecutors accused Butler and Tzolov of trying to win higher commissions by misleading clients into believing they were buying safe securities backed by federally guaranteed student loans, when in fact they were buying auction-rate securities backed by riskier mortgage and corporate debt. They said the scheme unraveled when auctions began to fail, causing losses at companies such as drugmakers GlaxoSmithKline Plc (GSK.L) and Roche Holding AG (ROG.VX), fertilizer maker Potash Corp of Saskatchewan Inc (POT.TO) and semiconductor company STMicroelectronics NV (STM.PA). The entire $330 billion auction-rate market collapsed in February 2008. On June 2, the Second Circuit upheld most of a roughly $400 million arbitration award for STMicroelectronics against Credit Suisse. Tzolov testified against Butler after pleading guilty in July 2009 to fraud and conspiracy, and to bail jumping for having fled to Spain. His lawyer Benjamin Brafman in an interview said Tzolov was sentenced last week to four years in prison, including the nearly two years he has already spent in federal custody.

Part of ex-Credit Suisse broker conviction tossed

A federal appeals court in New York threw out part of the conviction of former Credit Suisse Group AG (CSGN.VX) broker Eric Butler for misle...

The International Monetary Fund disclosed this weekend that it recently was the victim of a cyberattack

The International Monetary Fund disclosed this weekend that it recently was the victim of a cyberattack. This comes hard on the heels of Google's revelation that a relatively sophisticated attack tried to compromise email accounts of high-profile American policy makers, and a security breach at RSA, a company that manufactures security devices used by hundreds of thousands of employees at thousands of companies to access sensitive information on corporate computer networks. Such data breaches are becoming so commonplace they'll soon stop being news. The West, in short, is hemorrhaging data. But it increasingly looks like everyone is making matters worse by misidentifying the problem. Calling these episodes "cyberattacks" in a "cyberwar" is not helping. Such military terms are inapt for a situation where the means and purpose of the events are unclear, as are the antagonists. Careless use of these terms makes it harder to understand what's happening. Blanket use of the word cyberattack conflates different kinds of crime with different means and motives. One is a denial-of-service incident, a genuine attack where gangs of computers are coordinated to descend on one website simultaneously, hobbling it. This happened to Georgia in 2008 around the time of an armed conflict with Russia. But there also are "advanced persistent threats," prolonged assaults on the defenses of a network that can go on for months or years. The first is a genuine attack. An advanced persistent threat is more akin to a thief checking every door and every window until he finds a way in to steal and leave undetected. This is what most cyberwar is, and probably will be in the future. The IMF incident shows how confusion over the true nature of cyberwar makes it harder to address. Not a lot is known about the case. An IMF spokesman has merely issued a statement calling it a "cybersecurity incident." Given the propensity of organizations to drape a shroud of secrecy on such events, that may be all we'll ever know.

The International Monetary Fund disclosed this weekend that it recently was the victim of a cyberattack

The International Monetary Fund disclosed this weekend that it recently was the victim of a cyberattack. This comes hard on the heels of Goo...

One of China's biggest state-owned banks has requested details of a network of more than 600 Lloyds Banking Group branches as the prelude to a possible offer

One of China's biggest state-owned banks has requested details of a network of more than 600 Lloyds Banking Group branches as the prelude to a possible offer, I have learned. Bank of China, which is listed on the Hong Kong and Shanghai stock exchanges, is one of up to ten parties which were sent information yesterday about Project Verde, the codename given by Lloyds to the disposal of 4.6 per cent of the British current accounts market. To be clear, Bank of China's request for the information memorandum does not mean that it will actually table a bid for the branches. Indeed, it may simply be an attempt to obtain further information about the UK retail banking sector. But some of my senior City contacts have talked for several weeks about the prospect of Bank of China bidding for either the Lloyds branches or Northern Rock as it attempts to deploy part of its surplus liquidity overseas. Bank of China is one of a handful of large state-owned Chinese banks and is one of the biggest lenders in the world by market value. It's no stranger to the UK banking industry in that Royal Bank of Scotland was a shareholder and strategic partner of Bank of China's for several years (it sold its stake in the wake of its rescue by British taxpayers). At this stage, the idea of a bid by Bank of China for the Lloyds branches (which include Cheltenham & Gloucester, the Lloyds TSB network in Scotland, and Intelligent Finance, the internet bank) remains speculative. But if it were to become serious, it would add an unexpected name into an auction triggered by Lloyds' receipt of state aid during the banking crisis of 2008. I can also reveal today that the information memorandum distributed yesterday includes the first acknowledgement from Lloyds that it might need to expand the number of branches it sells because of the stance adopted by the Independent Commission on Banking (ICB). I'm told that the document contains a clause emphasising that the scale of the divestment might be altered during the sale process. It was inserted at the request of the Treasury, I understand, although the bank did not raise any objection to its inclusion. That looks like a pragmatic attitude from Antonio Horta-Osorio, the chief executive of Lloyds, who is fiercely opposed to the ICB's interim recommendation in April that the size of the business it offloads ought to be "substantially enhanced". People close to the situation have told me today that the clause is standard for a sale document such as this one but that it paves the way for some form of compromise deal to be agreed if the ICB succeeds in convincing Lloyds that the 620-odd branches it's already selling do not amount to a sufficiently powerful business in their own right. Among the other banks which have also received the Verde information are NBNK Investments, the acquisition vehicle headed by Lord Levene, chairman of Lloyd's of London; National Australia Bank (NAB), the owner of the Clydesdale and Yorkshire operations in the UK; and Virgin Money, Sir Richard Branson's banking business. As I revealed in March, NAB and NBNK have been holding talks about making a combined offer for the Lloyds assets, with the combined group reversing into NBNK's London stock market listing. It wouldn't surprise me if George Osborne, the Chancellor, made reference to the Lloyds process in his Mansion House speech on Wednesday, pointing out that efforts to introduce greater competition in British banking were proceeding apace under the Coalition. He may also, as I revealed last month, fire the starting gun on an auction of Northern Rock in the same speech. Lloyds declined to comment today.

One of China's biggest state-owned banks has requested details of a network of more than 600 Lloyds Banking Group branches as the prelude to a possible offer

One of China's biggest state-owned banks has requested details of a network of more than 600 Lloyds Banking Group branches as the prelud...

Fred Goodwin told by judge details of his affair were in the public interest

Sir Fred Goodwin, the former chief executive of the Royal Bank of Scotland (RBS), could not have expected to keep an alleged affair with a colleague concealed by the use of privacy injunctions because the nature of his job meant there was a public interest in his relationships, a judge has said. Mr Justice Tugendhat, ruling for the fourth time on the controversial case, also said it was reasonable to identify the woman's job description as "an important feature", but she should not be named because it would "be likely to cause distress to her". Sir Fred had a "reputation as an exceptionally forceful businessman", said the judge. He was "chief executive of one of the largest publicly quoted companies in the United Kingdom, doing business on a global scale" which made him "a public figure" whose private life was more likely to be of interest to the public. This public interest, it was said, distinguished Goodwin, under whose stewardship RBS had to be bailed out with £45 billion of taxpayers' money, from "sportsmen or celebrities" – such as footballer Ryan Giggs – who do not normally carry out "official functions" unless their indiscretions were to impact upon, for example, their football team. Few details of the nature of the alleged relationship between Goodwin and his colleague emerged in court, with neither party prepared to offer details in witness statements. Formally, RBS seems to have been unaware of the relationship until February 2011, more than two years after Goodwin left the bank, and just days before The Sun newspaper first contacted him regarding the allegation. Evidence from the woman stated that an internal investigation had been conducted by RBS, after which she had "not been criticised or disciplined" and it had "not been suggested by anyone at RBS that she was in a position of conflict or in breach of the RBS code [of conduct]". RBS refused to elaborate, other than to repeat its statement that it was "co-operating fully" with the City regulator, the Financial Services Authority. However, a witness statement from Goodwin in March – when he was still trying to maintain an injunction preventing the publication of his name – said he believed publication of the alleged affair would "lead to considerable, intrusive and disturbing speculation as to my private life and relationships", and "have a very substantial impact on the way in which friends, colleagues and business contacts relate to me and therefore a serious negative impact on my personal life and career". The Sun originally began inquiring about a story about Goodwin and the unamed woman on 1 March, and lawyers acting for the bank boss succeeded in obtaining an injunction preventing Goodwin being named via a telephone hearing later that day. However in May, the injunction was altered allowing Goodwin – but not the woman – to be named, hours after Lord Stonenham, speaking on behalf of Lord Oakeshott, used parliamentary privilege to identify Goodwin as somebody who had taken out a privacy injunction. In the ruling Tugendhat also criticised Lord Stoneham, who used parliamentary privilege to name Goodwin publicly for the first time, for deliberately "frustrating" the court order. In reply, Lord Oakeshott said: "Every taxpayer has the right to know all the relevant facts leading up to the collapse of RBS, including failures of corporate governance. Each individual failure of corporate governance might not have been enough to bring down the bank on its own, but every single emergency brake had to fail for RBS to crash so disastrously off the Forth Bridge."

Fred Goodwin told by judge details of his affair were in the public interest

Sir Fred Goodwin, the former chief executive of the Royal Bank of Scotland (RBS), could not have expected to keep an alleged affair with a c...

Citigroup hack puts thousands of US customers at risk

Multinational financial conglomerate Citigroup has become the latest high-profile organisation to suffer a hacking attack, after it was revealed that thousands of customers in the US may have had their Citi online accounts compromised. Widespread reports suggest that the attack happened in May, but that the banking group deliberately kept it from the media. Around one per cent of Citigroup's US customers are thought to have been affected, which could still run into the hundreds of thousands. Names, account numbers and email addresses are among the details thought to have been compromised. Other information, such as birth dates, social security numbers and card security codes, were not exposed, according to the Financial Times, which broke the story. Law enforcement officials have been contacted, and fraud detection measures tightened, according to the report. "We are contacting customers whose information was impacted. Citi has implemented enhanced procedures to prevent a recurrence of this type of event," the firm said in an emailed statement to Reuters. Citigroup added that it was not disclosing further details for security reasons. Ron Gula, chief executive of network security firm Tenable, argued that IT teams and those in the boardroom need to take a more proactive approach to security. "Moving forward, the IT network management environment is only going to become more complex and challenging, both internally and externally - so system administrators must ensure they have a holistic view of their networks and can see what's happening, at every moment, to make sure they're not the next company to leak their customer's details," he said. Richard Bentley, vice president for capital markets at Progress Software, argued that firms need to handle such incidents better. "It should be the responsibility of the company to inform its customers in real-time of any incidents of this nature and provide reassurance that it has been dealt with," he said. "Worryingly, what we are seeing is a lack of company responsiveness, a breach of a different kind that can be addressed instantly in the form of responsible customer service and engagement." The Citigroup revelations come with Sony still reeling from numerous attacks on its systems which have revealed key weaknesses, such as storing usernames in plain text. The hack on RSA Security also appears to have led to separate follow-on attacks on customers of its two-factor authentication tokens such as Lockheed Martin.<a href="http://www.v3.co.uk/v3-uk/news/2077779/citigroup-hack-detaills-thousands-customers-risk"> </a>

Citigroup hack puts thousands of US customers at risk

Multinational financial conglomerate Citigroup has become the latest high-profile organisation to suffer a hacking attack, after it was reve...

High Court judge has refused to lift an order banning journalists naming a woman with whom former bank boss Sir Fred Goodwin had an "extra-marital affair".

Lawyers from News Group Newspapers - publishers of The Sun and News of the World - asked Mr Justice Tugendhat earlier this month to lift the privacy injunction imposed earlier this year. Their application was opposed by lawyers representing the woman - a former work colleague of Sir Fred's. Mr Justice Tugendhat said the application by News Group "succeeds in part and fails in part". "The injunction will be varied to permit disclosure by NGN of the job description of VBN (the woman), but not disclosure of her name." The terms of the order giving effect to the variation have yet to be agreed. The judge added: "Until the order has been formulated, it would not be safe to attempt to interpret that." Hugh Tomlinson QC, for VBN, said he intends to pursue an appeal over disclosure of the job description and was granted a stay, holding the current position, until June 23 pending an application for permission to the Court of Appeal

High Court judge has refused to lift an order banning journalists naming a woman with whom former bank boss Sir Fred Goodwin had an "extra-marital affair".

Lawyers from News Group Newspapers - publishers of The Sun and News of the World - asked Mr Justice Tugendhat earlier this month to lift the...

HMV's lenders to take 5% stake in return for refinancing deal that will secure its short-term future

Beleaguered HMV has been thrown a £220m lifeline by its state-owned lenders that will see them take a 5% stake in the company. The retailer, which has issued four profit warnings this year, agreed a refinancing deal with its banks, Royal Bank of Scotland and Lloyds Banking Group, after months of talks. The agreement secures HMV's short-term future, and effectively gives UK taxpapers a stake in the struggling high-street chain. City analysts warned, though, that the agreement comes at a high price – as the interest rate on part of the loan could hit 14%. Poor sales and ballooning debts of £170m forced HMV to sell its book chain Waterstone's to Alexander Mamut, a Russian billionaire, for £53m last month. By pledging to use the money to pay down debt, chief executive Simon Fox persuaded the banks to agree the refinancing. Under the plan, warrants will be issued to the banks which will represent 5% of HMV's share capital when converted into shares after 30 June 2012. The restructuring gives HMV two years to revamp the business and get sales back on track. Fox is focusing on building technology sales, including headphones, iPods and tablet computers such as the iPad. He is also turning the company into a multimedia group that hosts concerts and opens cinemas with Curzon. The new £220m credit facility will replace HMV's previous bank facility of £240m. It comprises loans worth £70m and £90m and a £60m revolving credit facility, all of which mature on 30 September 2013. Interest is payable at 4% above Libor, the interest rate at which banks lend to each other. The company is blocked from paying dividends while the £90m loan is outstanding, and must also pay an exit fee on repayment. The interest rate on this exit fee will rise to 14% if it has not been repaid by 1 January 2013. "The banks clearly have the company over a barrel," said Kate Calvert, retail analyst at Seymour Pierce. "We are maintaining our Sell recommendation as we continue to believe that the business is a value trap and the Waterstone's deal is expected to be dilutive to earnings." The structure of the loan deal should encourage HMV to repay its debts quickly. John Stevenson of Peel Hunt said the deal would allow its management to focus on running the company again, but warned: "We fear this in an interim pause before the next step down." Joshua Raymond, market strategist at City Index, said that "the life support machine is still on for the struggling retailer".

HMV's lenders to take 5% stake in return for refinancing deal that will secure its short-term future

Beleaguered HMV has been thrown a £220m lifeline by its state-owned lenders that will see them take a 5% stake in the company. The retailer,...

IMF warns on UK banks masking bad debts

Lender forbearance, where loans are extended or payments reduced, “may, in some cases, have masked the extent of risks, given the high indeb...

Royal Bank of Scotland told by MPs to explain £25bn accounting 'distortion'

David Davis, the former Tory front bencher, and Steve Baker, the MP for Wycombe, have called for RBS to prove that its accounts are not being distorted by the controversial International Financial Reporting Standards (IFRS). The letter, seen by The Daily Telegraph, details a disagreement between the MPs and RBS at a private meeting on May 24. The MPs argued that IFRS, which has been described as a "fatally flawed" system, is inflating the profits and capital position of RBS and other banks. The MPs pointed to the fact that while RBS's accounts stated that the bank had £32bn in losses, the Government's Asset Protection scheme accounts show an expected loss of £57bn from its toxic assets alone. Written by Gordon Kerr, a banking expert, the letter claims that the distortion in the accounts could be equivalent to as much as 50pc of RBS's core tier one capital. It says: "That means on a prudent basis RBS has a basic capital ratio (leverage on total assets) of 2.75pc rather than 5.5pc as stated." The MPs claim that the rules are at fault but also that RBS has applied them more extensively than other European banks. Mr Baker is behind a Private Members Bill intended to make banks file accounts using the old UK GAAP standards, as well as IFRS, to force them to account for poor loans as well as failed ones.

Royal Bank of Scotland told by MPs to explain £25bn accounting 'distortion'

David Davis, the former Tory front bencher, and Steve Baker, the MP for Wycombe, have called for RBS to prove that its accounts are not bein...

Bank staff pressured to flog unnecessary loans

MORE than half of all bank employees have steered a customer towards a financial product they did not need in order to achieve performance targets set by management. That was one of the findings of a national survey of 3200 banking staff by the Financial Sector Union, which revealed growing resentment over strong-arm sales tactics used by the big four banks. Despite soaring levels of household debt and credit card fatigue, banks are increasingly using financial incentives to motivate staff to flog more loans and credit cards. Advertisement: Story continues below The survey showed almost 90 per cent of all bank workers now earn up to a quarter of their total remuneration in bonuses. Of the big four banks, Westpac and ANZ placed the most pressure on staff to foist financial products on customers. Almost 8 per cent of respondents from ANZ bank admitted they always tried to persuade customers to take on more debt than necessary. National Australia Bank staff were under the least pressure to up-sell. Union national secretary Leon Carter said some workers felt their job security depended on meeting performance targets that were often ''unrealistic and rigorously enforced''. ''What's being rewarded is the 'Do you want fries with that?' mentality. The system of performance targets and incentives is completely at odds with the notion of responsible lending and professional service.'' He said 85 per cent of staff wanted the big four banks to strike a better balance between customer service and corporate profits. The Australian Bankers Association said it was unable to comment on industrial relations issues.

Bank staff pressured to flog unnecessary loans

MORE than half of all bank employees have steered a customer towards a financial product they did not need in order to achieve performance t...

AIB bond investors challenge Irish govt on losses

Junior bondholders in Allied Irish Banks (ALBK.I) will take the Irish government to court on Thursday over its plans to slash the value of their investments in a test case of Ireland's tough stance on burden-sharing. Dublin is hoping to cut around 5 billion euros from a 70 billion euros bill for bailing out its banking sector by imposing losses of up to 90 percent on junior bonds in AIB, Bank of Ireland (BKIR.I), Irish Life & Permanent (IPM.I) and EBS Building Society [EBSBS.UL]. But two bondholders in AIB, Aurelius Capital Management and Abadi Co, are challenging the court order issued by Finance Minister Michael Noonan imposing losses of between 75 and 90 percent on 2.6 billion euros of AIB's subordinated debt. Noonan, who has faced criticism for not imposing losses on banks' senior bondholders due to opposition from the European Central Bank (ECB), is using sweeping new legislation to execute the losses, which are designed to ease the burden on taxpayers. The legislation, which was passed by the previous government in December amid controversy over its wide scope, gives Noonan powers to radically overhaul the financial sector in the aftermath of a devastating property crash. Legal experts said the scope of the law and the fact that bondholders would likely have lost all of their investments had the government not stepped in to save the banking sector from collapse meant that Aurelius and Abadi faced an uphill battle in court. "Without the bailout, they would have been wiped out," said Sandeep Gopalan, head of the law department at the National University of Ireland, Maynooth. "In this climate the court is unlikely to intervene on the side of the bondholders." Carlos Abadi, director of Abadi & Co Securities, said the Irish government's order imposing losses on AIB's junior bonds violated their property rights. "We believe we have solid and cogent grounds for claims and that we are confident we will be given a fair hearing," he said. "There is a general consensus that bondholders do recognise the necessity of some kind of burden-sharing. What holders object to is the means by which Ireland is attempting to extract that burden-sharing." Abadi said the hearing was scheduled to run for four days. The High Court will then make its decision, but there is the possibility the case and any subsequent appeals could hold up the government's burden-sharing plans. The deadline for most of AIB's junior bondholders to notify the bank whether they accept the buyback is June 13. A decision in favour of the bondholders could disrupt the government's burden-sharing plans while a thumbs-up for the state could deter other investors from challenging it. "This legislation was breaking new ground, so any in-depth analysis of the law in this area is similarly breaking new ground," said Nollaig Murphy, a partner at Maples and Calder law firm in Dublin.

AIB bond investors challenge Irish govt on losses

Junior bondholders in Allied Irish Banks (ALBK.I) will take the Irish government to court on Thursday over its plans to slash the value of t...

Irish banks may be forced to declare millions of euros of extra losses under surprise plans by Ireland's authorities

The Central Bank of Ireland wants to force its banks to account for poor loans the way they used to under Irish GAAP and over-ride controversial International Financial Reporting Standards (IFRS). The move, which the central bank said it hoped to announce within weeks, would leave UK banks isolated in their application of IFRS. A similar overhaul in Britain would have a radical impact on the declared capital positions and profits of British banks. Experts have warned that banks in the UK and Ireland - both of which are governed by the Accounting Standards Board (ASB) - have implemented IFRS in a unique way. IFRS has been criticised for allowing banks to hide risks because poor loans do not appear until they have failed. The rules, which were introduced in 2005, also allow banks to spread losses across several years rather than recognise immediately. Ireland's central bank is determined to clean-up the banks' balance sheets in a bid to restore confidence to the shattered sector. The central bank believes that bringing transparency is vital ahead of the €24bn bank recapitalisation programme in July.

Irish banks may be forced to declare millions of euros of extra losses under surprise plans by Ireland's authorities

The Central Bank of Ireland wants to force its banks to account for poor loans the way they used to under Irish GAAP and over-ride controver...