A group of investors yesterday filed a claim for compensation from Lloyds Banking Group for losses they claim they incurred during the rescue of HBOS in 2008.

The Lloyds Action Now activist group has spent years assembling the case, which argues that the true health of HBOS was deliberately concealed from investors when Lloyds was taking over the troubled bank. The enlarged bank later had to be bailed out with £20bn of taxpayer money.

No specific amount of compensation has been outlined in the claim, but it is argued that £12bn of shareholder value was lost when HBOS was taken over.

These are not the only court proceedings to be filed against one of the banks rescued by taxpayers during the crisis. Royal Bank of Scotland shareholders are claiming more than £4bn because, they argue, they were misled by the bank during a cash call it launched before being bailed out by the taxpayer.

Taxpayers own 81% of RBS and 24% of Lloyds. There is speculation that the government intends to dispose of the rest of its stake in Lloyds before the general election next year.

On the compensation claim, a spokesman for Lloyds said: “The group’s position remains that we do not consider there to be any legal basis to these claims and we will robustly contest this legal action.”

The Lloyds Action Now shareholders said they had named a number of former Lloyds directors in the claim, including the former chairman Sir Victor Blank, the former chief executive Eric Daniels and three other former directors.

The shareholders argue that information about the emergency funding HBOS was receiving, such as the £25bn received through the Bank of England’s emergency liquidity assistance facility, was not disclosed at the time of the Lloyds deal. Their case, which Lloyds has until December to formally respond to, also alleges that there was a loan from the US Federal Reserve that was not disclosed.

There are 7,500 shareholders signed up to the lawsuit. An application has been made for a group litigation order to allow up to 800,000 more to join, and to open the door for major institutional investors that may have an interest. The case is being funded by unidentified specialist investors that support litigation claims.

Adrian Lithgow, one of the founders of Lloyds Action Now, said: “After five years of struggling against immense odds we have now got our case into court. Hundreds of thousands of ordinary savers had their lives wrecked by bankers and the Labour government when they were gulled into saving them from the financial crisis – a crisis of the government’s and the bankers’ own making.”

Both Lloyds and RBS announced their first-half results last month. Lloyds profits more than halved, to £863m, while RBS reported its highest first-half profits since its bailout, at £2.6bn.


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